Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

Oral Answers to Questions — SCOTLAND

Economic Trends

Mr. James Hamilton: asked the Secretary of State for Scotland when he will next meet the general secretary and general council of the Scottish Trades Union Congress to discuss economic trends in Scotland.

The Secretary of State for Scotland (Mr. Malcolm Rifkind): I am to meet a delegation from the General Council of the Scottish Trades Union Congress on 20 June 1986.

Mr. Hamilton: When the Secretary of State meets the general council, will he concede that, from the evidence of the local election results and the results of the System 3 opinion poll that have been made available to us today, the people of Scotland want no part of this Government's policies? Will the right hon. and learned Gentleman align himself with members of the Cabinet and some of the senior Conservative Back Benchers who are asking for a change in policy? Is he aware that in Motherwell there is 22 per cent. unemployment? Will he show some compassion for the unemployed in Scotland, and in Motherwell in particular?

Mr. Rifkind: I doubt whether the STUC will wish to discuss local elections or the System 3 opinion polls. As to unemployment, since the Conservative Government came into office the regional seletive assistance provided by the Government has helped to create 2,977 new jobs in Motherwell, and the Motherwell project, to which the Government-funded Scottish Development Agency contributes, has helped to create a further 2,000 new jobs. The hon. Gentleman will be fair enough to acknowledge that the Government, both directly and indirectly, have made an important contribution towards job creation in his constituency.

Mr. Pollock: In his discussions with the STUC, will my right hon. and learned Friend bear in mind the problems facing the oil rig construction yards in Scotland? In particular, will he do what he can to ensure an even and fair distribution of work among the yards in Scotland at this anxious time?

Mr. Rifkind: My hon. Friend is right to draw attention to the concern that we feel about the possible implications for oil rig construction of the oil companies' plans. I use

every opportunity to press on them the fact that any investment made now will be for a return over the next 10 to 15 years, and so they should base their plans on what is likely to happen to oil prices over that time and not indulge in a panic reaction to current short-term fluctuations in the price of oil.

Mr. Kennedy: Further to the question from the hon. Member for Moray (Mr. Pollock), when the Secretary of State meets the STUC, will he, thinking of my constituency interest and that of the hon. Member's, pay attention to the responsible and constructive efforts that the STUC has been making? Will he ensure that whichever yard, be it Ardersier of Nigg, wins the. Shell Eider contract, the Government will do everything humanly possible to ensure that as much as possible of the subcontracted work associated with the contract goes to the unsuccessful yard? Is he aware that the social impact for the yard that loses will be devastating, given the levels of unemployment in our respective constituencies?

Mr. Rifkind: I share the hon. Gentleman's concern to ensure the maximum work for both yards, and the whole House would wish to see that. There are major constraints on any Government in terms of directing individual items of work to a particular yard, but one hopes that the end result will involve a suitable work load for both yards.

Mr. Henderson: Does my right hon. and learned Friend agree that one of the most significant economic trends is that Scotland has moved from being one of the lowest paid to one of the wealthiest areas in the United Kingdom, during which period the United Kingdom has enjoyed five years of continuous economic growth?

Mr. Rifkind: My hon. Friend is correct. Outside the south-east of England and East Anglia, Scotland has a higher income and gross domestic product per capita than almost any other part of the United Kingdom, and that is not a claim that could have been made in 1979.

Mr. Eadie: When the right hon. and learned Gentleman meets the STUC, the general council will be able to tell him that coal production at some Scottish pits will cease. Will the right hon. and learned Gentleman tell us when his Department authorised the South of Scotland Electricity Board to place the Scottish mining industry in this peril?

Mr. Rifkind: At no time. The South of Scotland Electricity Board acts under statutory powers and determines what is appropriate in the interests of the consumers whom it is designed to serve. At no time does it either seek or require authorisation from the Scottish Office for any such decisions.

Mr. Bill Walker: When my right hon. and learned Friend next meets the STUC, will he draw to its attention the fact that inflation is now at its lowest level for many decades and that with inflation standing at 3 per cent. wage increases and demands in excess of that are likely to put more jobs at risk and in peril if we are to remain competitive? Will my right hon. and learned Friend also draw its attention to how popular he personally is north Tayside and to the fact that we are looking forward to his visit on 21 June and that his popularity was probably reflected in the good results that we had in the regional elections?

Mr. Rifkind: I am certainly looking forward to my visit to my hon. Friend's constituency on 21 June. I can


think of no better way of spending my birthday than in my hon. Friend's constituency. With regard to my forthcoming meeting with the STUC, one of the points that I shall certainly be mentioning to them, in addition to the comments made by my hon. Friend, is that over 50,000 more people are in employment in Scotland today than there were in 1983 at the time of the last general election.

Mr. Martin: If the Minister is so confident about employment, what does he intend to do about Springburn? The railway works have suffered a terrible blow during the last week. To add insult to injury, there is an apprentice training school on those premises which has machinery and equipment to cater for 110 apprentices. Not one apprentice has been trained there during the past 18 months. The padlock has been put on the door. That is a ridiculous situation in the engineering capital of Scotland. The west of Scotland should be training young engineers if the economy is to take a turn for the better.

Mr. Rifkind: I share the hon. Gentleman's concern about the implications for the Springburn employees. He will be aware that that arises out of decisions that affected a number of similar establishments in various parts of the United Kingdom. With regard to his particular question about the training of the young, he will be aware of the enormous resources that the Government are pouring into youth training. Over £1 billion is being spent on youth training. This is helping to provide very appropriate training, which is enabling more than 60 per cent. of the youngsters who get this training to go immediately into full-time employment at the end of their training period. That is something which no previous Government have done.

Mr. Wilson: Will the Secretary of State say what prospects for long-term economic advance can be expected in Scotland when Scottish universities are faced with closure and redundancies? What action does he intend to take with his right hon. Friend and the English controlled University Grants Commission——

Mr. Speaker: Order. Does this question relate to the general council of the Scottish Trades Union Congress?

Mr. Wilson: It relates to the economic aspects and to the need for improved technology. Will the Minister answer that question?

Mr. Rifkind: On the wider economic aspects, I can assure the hon. Gentleman that there is no question of any university facing closure. My right hon. Friend the then Secretary of State for Education and Science made it clear that the Government were prepared to consider further resources for the university sector. That is a matter that the universities will wish to take into account.

Mr. Michael Forsyth: When my right hon. and learned Friend meets the STUC, will he take the opportunity to ask it to condemn the unilateral action taken by the new Socialist administration on the Lothian regional council in reducing dramatically expenditure on Scottish infrastructure by cancelling the Lothian relief road and thus destroying jobs in Scotland?

Mr. Rifkind: It is certainly of interest that the first significant decision of the new controlling group on the Lothian regional council was to announce a major cut in public expenditure, which therefore removed the prospect of many jobs being created.

Mr. Dewar: If the Secretary of State is so concerned about levels of public spending, is he in a position to give the STUC a guarantee that the Scottish Office budget will not be affected by the rather primitive and much advertised approach to housing finance of the new Secretary of State for the Environment? Will he also recognise that, despite the somewhat comic opera loyalty of those on the Benches behind him, there is a growing fear in Scotland about the level of unemployment and that the Scottish economy has reached a point of no return? Will he recall that he has had an approach from the Strathclyde regional council, and I think also from the STUC, which supports the initiative, arguing the case for an economic summit where all parts of Scottish life—academic, industrial, and, no doubt, political—can discuss the need for a change of direction to recover the situation? May we have a positive response to that appeal and, if so, when will it come?

Mr. Rifkind: I frankly doubt whether proposals for a summit are likely to prove a sensible way forward, but I am always interested to hear any constructive suggestions either from the regional council or the STUC, which will be coming to see me on 20 June, or any other bodies. The hon. Gentleman will be aware that the allocation of resources to the Scottish Office stems directly from a formula system. Indeed, if I recall correctly, that formula system was introduced under the previous Labour Government.

New Town Development Corporations

Mr. Norman Hogg: asked the Secretary of State for Scotland when he next expects to meet the chairmen of the new town development corporations; and what subject he hopes to discuss.

The Parliamentary Under-Secretary of State for Scotland (Mr. Michael Ancram): My right hon. and learned Friend plans to meet the chairmen on 14 July this year, when he would hope to discuss a range of matters of interest or concern to the new towns.

Mr. Hogg: Does the Minister agree that the most important thing that the Secretary of State could discuss with the chairmen of the new towns is employment, particularly the protection of employment, and job creation in new towns? Does he also agree that the urgency for that is underlined by recent events in my constituency where the largest departmental store, Woolco, is now to close with a loss of 181 jobs? What new initiatives will the Secretary of State announce to the chairmen of the new towns to create jobs in future?

Mr. Ancram: Obviously the provision of jobs is an important matter, and my right hon. and learned Friend will be discussing that issue. However, the hon. Gentleman is less than fair in suggesting that the new towns have done badly. Between May 1979 and April 1986, £110 million has been invested in the new towns, leading to 23,747 new jobs. In Cumbernauld in the hon. Gentleman's constituency over the past year 43 new companies have come about, 19 local firms have expanded and there are 800 new jobs there, with a promise of 800 more to come. I hope that the hon. Gentleman will welcome that.

Mr. Forth: Is my hon. Friend prepared to follow the excellent example given in England, where there has been a process of winding up the development corporations and


returning towns to democratic control? Is he prepared to take that bold step in order to ensure that towns will develop in their own natural way rather than being force fed with public money?

Mr. Ancram: I understand what my hon. Friend says. The present policy envisages new towns in Scotland being wound up when their populations reach a certain figure, but no corporation will begin to wind up before 1 April, 1990 and the position will be reviewed in 1989. Our current policy is that the new towns' remaining housing stock should on wind up be transferred to district councils, but if the new towns come forward with proposals for disposing of that in other ways, we would give those consideration.

Mr. Hugh Brown: When the Secretary of State meets the chairmen of the corporations, will he consider including on the agenda the disastrous results of housing policies which mean that many of my poor constituents' elderly relatives are unable to join their families?

Mr. Ancram: I am not sure to what precise policies the hon. Gentleman is referring, but if he will write to me on that issue I shall reply.

Chapelcross Power Station

Mr. Foulkes: asked the Secretary of State for Scotland what information he has in relation to the design of Chapelcross power station as it relates to the potential danger from earth tremors; what representations he has received on this matter; and if he will make a statement.

Mr. Ancram: I refer the hon. Gentleman to the replies given by my hon. Friend the Parliamentary Under-Secretary of State for Energy, the hon. Member for Eddisbury (Mr. Goodlad), to the hon. Member for Yeovil (Mr. Ashdown) on 18 March 1986, which dealt with this issue in detail. My right hon. and learned Friend has had no representations about this matter.

Mr. Foulkes: Is the Under-Secretary aware that in 1983 a report from structural engineers to British Nuclear Fuels Ltd. said that Chapelcross, one of the oldest power stations in the United Kingdom, was vulnerable to relatively minor earth tremors and should be closed down? Will he confirm that the reason why nothing was done about that was that Chapelcross produces tritium for British, and, perhaps, American warheads and bombs? If the hon. Gentleman believes what his colleagues say, that Britain is far more open and honest on this issue than the Soviet Union, will he agree to publish all the documents relating to safety at Chapelcross?

Mr. Ancram: Once again the hon. Gentleman is trying to create scares with no foundation. I remind him of what my hon. Friend said in the answer to which I referred. He explained that he was
advised by the Nuclear Installations Inspectorate that the seismic structural assessments carried out by the BNFL for the Calder Hall and Chapelcross reactor demonstrate that the reactor could be safely shut down and maintained in a safe condition following an earthquake with a peak field horizontal acceleration of 0·11g although some damage to non-essential service buildings would occur".—[Official Report, 18 March 1986; Vol. 94, c. 124.]
The NII has required the operators of Magnox stations to carry out a long-term safety review at about 20 years' operating life to confirm that they are safe for continued operation, to identify any factors which may limit the safe

operation of the plant and to assess safety standards to determine whether any improvements are appropriate. The conclusion of these reviews will in future be published.

Irvine New Town

Mr. Lambie: asked the Secretary of State for Scotland if he will make an official visit to Irvine new town.

Mr. Ancram: My right hon. and learned Friend has at present no plans to do so.

Mr. Lambie: That answer will be a disappointment to my constituents, who had hoped that the Secretary of State would visit Irvine to look into the affairs of Co-Star Ltd., a computer company which has three directors, one Scot and two Americans, one of whom, according to a Sunday newspaper, is on the run from the FBI in the United States.
Is the Minister aware that Co-Star Ltd. disappeared after receiving a financial package to set up in Irvine, and that two of the directors formed a new company called Muir-Anderson Associates Ltd., which received help from a local enterprise trust, Asset, to set up another company in Stevenson? Is the Minister further aware that these two directors have now formed a new company which has moved to Cumnock, where they are receiving a further financial package prepared by the local enterprise trust, Cadet, NCB (Enterprises) Ltd. and the Scottish Development Agency under the new name of Comerbeams? When will the Minister——

Mr. Speaker: Order. Briefly.

Mr. Lambie: When will the Minister investigate the affairs of this company and ensure that the grants are withdrawn and that those responsible are prosecuted?

Mr. Ancram: I appreciate that the people of Irvine will be disappointed that my right hon. and learned Friend is not to visit them, as are communites in other parts of Scotland which my right hon. and learned Friend has not yet been able to visit. As for the hon. Gentleman's supplementary question, I can say that grant was paid and that first steps have already been taken towards recovering the full amount of grant from Co-Star. In view of what has happened, the new company will be subject to particularly careful scrutiny.

Electricity Generation

Mr. Home Robertson: asked the Secretary of State for Scotland what is the total capacity of the generation stations of the two Scottish electricity boards; and what is the maximum recorded demand for electricity in Scotland.

Mr. Rifkind: I am advised by the Scottish electricity boards that, excluding oil-fired capacity held in reserve, the maximum available sent-out capacity of the Scottish generation system is 8,839 MW. The maximum simultaneous demand ever recorded was 6,341 MW during the severe winter of 1981–82.

Mr. Home Robertson: As we now have such massive excess generating capacity in Scotland, and as serious concern is being expressed about the Chernobyl disaster, why are the Government in such haste to commission a further 1,400 MW of nuclear generating capacity at Torness ahead of schedule? Will the Secretary of State halt the fuelling of the reactors at Torness, at least until such


time as the environmental, safety and economic consequences of the commissioning of that power station can be considered properly?

Mr. Rifkind: The Government are in no haste to do anything — [Interruption.] A well-known phrase or saying is "act in haste and repent at leisure", which I am happy to confirm. The hon. Gentleman should realise that the British nuclear industry has a superb safety record. He should appreciate that in the past 30 years there has not been one significant incident anywhere in the United Kingdom involving danger to the health or life of the public. If I remember correctly, the hon. Gentleman advocated the construction of the Torness nuclear power station when he first sought to represent his constituency in this place. It is somewhat odd that he is now trying to pretend that he has different views.

Mr. Fletcher: Does my right hon. and learned Friend agree that Scotland has a great deal of knowledge and practical experience of nuclear energy — indeed, as much as anyone—and that it has been put to very good use by the South of Scotland Electricity Board in the construction of the station at Torness, not least with regard to public safety? However, will my right hon. and learned Friend take steps to counter the current unease about nuclear power, following the disaster in Russia, by tapping that knowledge and experience in Scotland, not just in the SSEB, but among industrialists and academics, so that they may better inform the public and put aside some of the fears that people feel at this time?

Mr. Rifkind: Of course, my hon. Friend is absolutely correct. Understandable concern has arisen out of the Chernobyl incident. I believe that the correct policy to pursue, which the Scottish Office and the Government as a whole pursue, is the maximum disclosure of all information and the maximum utilisation of any new information that is available, which will enhance even further the extremely high safety standards that we already have. That is an ongoing process. It is right and proper that everything possible should be done to ensure that the public are aware that the maximum safety standards are available, and that all information which is relevant is always disclosed, so that the public can come to a considered judgment on those matters.

Mr. Strang: Does the Secretary of State accept that Chernobyl has changed matters and that there is an overwhelming view in Scotland that we should reduce our dependence on civil nuclear power? If the Government are not prepared to do that, will the right hon. and learned Gentleman give an assurance that the Government will not prevent the next Government from doing so, by closing down coal production capacity? Will the right hon. and learned Gentleman give an assurance that there will be no reduction in coal production in Scotland over the next few years?

Mr. Rifkind: The hon. Gentleman will be aware that the level of coal production will depend on several factors, including demand. The SSEB may have a requirement for increased coal consumption over the years to come, irrespective of what happens to the existing nuclear power stations. The hon. Gentleman and his colleagues often press upon the Government the need to help industry. He must be aware that if we ceased to use civil nuclear power in Scotland, the electricity tariffs for industry in Scotland,

as well as for consumers, would go up dramatically. It has been suggested that increases of between 25 and 30 per cent. in the electricity tariffs would be required if we ceased to use all civil nuclear power in Scotland.

Mr. Donald Stewart: Does the right hon. and learned Gentleman accept that that gross overcapacity of electricity in Scotland, arising partly from nuclear power, might cause further embarrassment shortly if the French dump cheap electricity in England, which would do away with 1,000 MW currently being exported from Scotland to England? Does the right hon. and learned Gentleman accept the consequences for Scottish mining, where demand has been cut almost to one quarter in recent years? Does he further accept the view of most people in Scotland that there is not the slightest rational ground for going ahead with Torness?

Mr. Rifkind: If the right hon. Gentleman is concerned about the capacity of the French to export their electicity on a competitive basis, he might like to reflect that France has a higher level of civil nuclear power than almost any other European country. That emphasises the point that I made earlier, that if we are interested in cheap power for the benefit of the public as a whole and of industry, it is essential to use those resources when they are available.

Mr. Michael Forsyth: Will my right hon. and learned Friend make every effort to make it clear to the people of Scotland that the Opposition's policies on nuclear power would result in higher electricity bills for consumers, making it more difficult for pensioners to heat their homes? Are there not double standards, through the Opposition exaggerating the dangers of nuclear power and imposing higher costs on the elderly to suit their own political ideology?

Mr. Rifkind: Not only are there double standards, but there appears to be a deep gulf between the representations that have been made today and the reported comments of the leader of the Labour party, who indicated an assumption that Torness would go ahead, and that it would be unwise or unreasonable to assume anything to the contrary. I suggest that Opposition Members and their Leader ought to get their act together.

Mr. Dewar: Like the Minister, I accept that the first and overriding priority in this matter must be public safety. Does the Secretary of State recognise that there are fears about the implications of the expansion of nuclear power in Scotland? That point has been made by a number of his own Back Benchers during Question Time. Will he consider making available a document setting out the Government's best estimate of the impact on other forms of energy and on the industries that produce them, especially the impact on coal and the SSEB coal burn? Will he also consider whether he should at rather more length deploy the arguments which support the figure of an increase of 25 or 30 per cent. in electricity costs if we were to reduce our dependency on nuclear power, which some of us think is a surprisingly high figure? In such a paper, will he deal with the arguments that many people will take from the figures that he gave at the beginning of this exchange about capacity, the peak of demand last winter and the apparent sufficiency of the present levels of nuclear generating capacity in Scotland?

Mr. Rifkind: The hon. Gentleman will appreciate that responsibility for energy policy rests with my right hon.


Friend the Secretary of State for Energy. The Government are willing that all the relevant information should be available to the general public so that people can come to their own considered judgment about a sensible policy to pursue. I note that the hon. Gentleman has not associated himself with the views of some of his more enthusiastic colleagues who are calling either for Torness not to be commissioned or for civil nuclear power not to be utilised. We wait with interest to hear the hon. Gentleman's views on these matters. So far he has been silent about them.

Mr. Henderson: Will my right hon. and learned Friend tell the House something about the figures for the comparative prices of generating electricity by nuclear and by coal-fired methods and the amount of pollution that each method produces? Does he agree that there has been no significant change about whether or not Torness should have been built since the time when the Labour Government were in office and authorised it, except that the Government have changed and some Opposition Members are being opportunistic?

Mr. Rifkind: I think that there is a degree of opportunism here. However, I accept that, inevitably, many members of the public who do not choose to have access to scientific information may be uncertain as to whether there is some association between the events at Chernobyl and their relevance for the United Kingdom. I hope that hon. Members who take an interest in these matters will be objective rather than scare-mongering in their public comments and accept that the factors which led to the disaster in Chernobyl are not relevant to any nuclear power station in the United Kingdom.

School Buildings

Mr. Dalyell: asked the Secretary of State for Scotland what study he is making of the essential maintenance needs of school buildings in Scotland.

Mr. Rifkind: There are two studies under way at present: a national accommodation survey by my Department in conjunction with the Convention of Scottish Local Authorities, and a research commission which will sample the maintenance characteristics of schools in one education authority area.

Mr. Dalyell: What is the time scale for these studies? Has the old adage that a stitch in time saves nine ever been more applicable than to the crumbling state of many of our schools?

Mr. Rifkind: The results of the surveys will be made known as soon as they are available. The hon. Gentleman knows perfectly well that one of the difficulties especially relevant in the Lothian region about the maintenance of certain buildings is that the local authorities have insisted on retaining far more surplus school capacity than is justified by the number of pupils. If local authorities insist on maintaining half empty school buildings, not only does that mean that resources have to be diverted to the heating and maintenance of these half empty buildings, but it denies proper educational opportunities to pupils in some of these schools. Such opportunities cannot be made available in a school that is only half full. Local authorities throughout Scotland have to bear in mind that resources are much better utilised on school books and on facilities of that kind than on the maintenance of more buildings than they need.

Mr. Bill Walker: Does my right hon. and learned Friend agree that one of the major problems is that in recent times authorities have not conducted policies that work for the benefit of the children by maintaining buildings in a fit state in which the children can be properly and adequately educated, but have been more inclined towards politically oriented activities for the sake of publicity? We require a fundamental review—part of which my right hon. and learned Friend will agree is under way at the moment regarding teachers' pay and conditions—of how we practise education in all its different ways in Scotland in order to get rid of the genuine anxiety that is felt by many people. In areas like mine, where schools are being closed——

Mr. Speaker: Order. This is a bit wide of school buildings.

Mr. Bill Walker: Schools are being closed in my area, but my constituents accept this because it is sensible for the better utilisation of resources.

Mr. Rifkind: It is certainly correct to approach the various issues that are relevant to education in that way. The inquiry which the Government have announced will have wide terms of reference and will enable us to approach the matter in that way.

Mr. Maxton: In view of the answer that the Secretary of State gave to my hon. Friend the Member for Linlithgow (Mr. Dalyell), perhaps he would care to list the schools that he would like Lothian region to close. I am sure that the right hon. and learned Gentleman's constituents would like to know the answer to that question. Does he accept that the real cause of the decline in the fabric of school buildings is the massive cuts that the Government have imposed on local government? Does he further accept that in the recent elections the people of Scotland clearly stated what they think about the Government's education policies?

Mr. Rifkind: That was a rather predictable question. The hon. Gentleman might like to reflect on the figures produced by Strathclyde regional council, which estimated in the early 1980s that by 1991 a fall in school rolls would result in a surplus of no fewer than 230,000 school places. The hon. Gentleman is intelligent enough to be aware that if there is a surplus of 230,000 places—[Interruption.] This is arithmetic, which I am sure the hon. Gentleman will appreciate. If there is a surplus of 230,000 places and the number of school buildings is not reduced by a proportionate amount, a lot of resources will be wasted when they could be better used to provide good education for children. That is the lesson of the day that the hon. Gentleman might like to try to absorb.

Knockinlaw Project

Mr. McKelvey: asked the Secretary of State for Scotland when he plans to visit Kilmarnock to review the Knockinlaw project.

Mr. Ancram: My right hon. and learned Friend cannot fit in a visit at present, but he will bear the invitation in mind for the future.

Mr. McKelvey: I am sure that the Secretary of State would not expect me to say that he is much loved in the district of Kilmarnock, but he is respected as an intelligent and sincere man. [Interruption.] I am not responsible for


the thoughts of my constituents on these matters. Could he make it a matter of urgency to come to Kilmarnock to see the Knockinlaw project? We are grateful for the money that the Scottish Office has provided, but we could do with more, especially to refurbish the shop frontage, which covers three commercial enterprises and two which belong to the district council. It seems that no grants are available. Will he consider whether grants can be made available so that we can brighten up the shop fronts and enhance the area so that the quality of life of shopkeepers and customers may be improved?

Mr. Ancram: My right hon. and learned Friend visited the Knockinlaw project in 1981 and I visited it in October 1983. We were both impressed by the successful way in which it had marshalled a wide variety of resources. The hon. Gentleman must be aware that we have given considerable resources to Kilmarnock and Loudon during the past two years. Its housing revenue account has increased by 53 per cent.—and that is no mean figure. I appreciate that there can be difficulties because of varied ownership, but the commercial shopowners might consider a joint approach to the Scottish Development Agency to explore the possibility of assistance towards the cost of improving the general appearance of their premises.

Hospital Facilities (West Fife)

Mr. Douglas: asked the Secretary of State for Scotland if he will make a statement on the future development of hospital facilities in west Fife.

The Parliamentary Under-Secretary of State for Scotland (Mr. John MacKay): I have asked the health board to give further thought to its proposals for the provision of acute services in the whole of its area, including west Fife. I shall give careful consideration to the board's revised proposals when they are submitted.

Mr. Douglas: That is an interesting reply. What does the Minister have in mind by asking the Fife health board to give the matter further consideration? Does he share the board's anxiety that this further review might incur a delay in phase two of the Dumfermline and West Fife general hospital, which would not be in the interests of the overall development of hospital services in west Fife? When does he expect to make a decision on this further review?

Mr. MacKay: I appreciate the anxiety on this matter. The hon. Gentleman knows that there are different points of view in Fife about the board's future building programme. The original appraisal of the options open to it was based on the assumption that scope for development of the Victoria hospital in Kirkcaldy was limited. The most recent professional building advice states that further development may be possible. On that basis, I have asked the board to explore that possibility.

Mr. Gordon Brown: Is the Minister not ashamed of the latest figures for Fife, which show that more than 5,000 people are on the waiting list, 2,000 of whom have been waiting for more than one year and more than 1,000 of whom have been waiting for more than two years? Is he aware of the advice of the chief medical officer, that the waiting list will not fall substantially until the second phase of the Dunfermline and West Fife hospital is built? Will he therefore give urgent attention to the approval of the hospital scheme?

Mr. MacKay: Of course I shall give urgent attention to its approval, but it is important that we get the plan right, because it will have to serve the area for some time to come. In the past seven years, three major projects have come on stream in the Fife health board area. In addition to the major projects, Fife health board, as a beneficiary of SHARE, is employing more medical and nursing staff and is attending to considerably more patients than when the Government took office.

Mr. Henderson: Does my hon. Friend accept that although it is important to get this matter right, it is unfortunate that his Department has come along comparatively late in the day inviting further consideration of the position in Kirkcaldy? Is he aware that the people of Fife are grateful for the amount of new building that has been provided under this Government, one measure of which is that the rates bill for the new build since 1979 amounts to £500,000 a year?

Mr. MacKay: I appreciate my hon. Friend's point. He rightly stresses the expense to the health boards, not only in Fife but elsewhere in Scotland, of local authority rates. That is not helped by the higher rating of new premises that have come on stream since 1979. I am aware of the need to make a decision, but I am equally aware of the need to make the correct decision and to consider the position in Kirkcaldy before making a final decision.

Forestry Commission

Mr. Ron Davies: asked the Secretary of State for Scotland what representations he has received concerning the consultation paper, "The Composition and Procedures of the Forestry Commission's Regional Advisory Committees".

Mr. John MacKay: My right hon. and learned Friend has received no representations.

Mr. Davies: Will the Minister confirm that representations should have been received by last Friday if individuals or organisations wished to make representations to him? As he has received no representations, will he now consider opening regional advisory committee meetings to the press and public? The Government have committed themselves to freedom of information. They have supported legislation requiring local authorities to open their proceedings to the press and public. In view of the increasing sensitivity of the public to the operations of the Forestry Commission, does he accept that if the press and public were guaranteed access to the meetings and deliberations of the RACs that would provide greater safeguards for the public interest?

Mr. MacKay: Comments were asked for by the Forestry Commission, and the deadline was the end of May. I understand that the commission has received written comments from 28 organisations, and they are being analysed. The commission has decided to extend the period to allow for further written comments. There is no deadline, but the commission and the Government wish the comments to arrive as quickly as possible. The commission would be willing to meet any reasonable requests for meetings to discuss openness.

Mr. Pollock: Does my hon. Friend accept that a most effective way of ensuring the future operation of the regional advisory committees would be for the


Government to make clear their continuing commitment to the Forestry Commission as a whole, remembering that it commands wide public respect and support throughout Scotland?

Mr. MacKay: I have drawn the attention of hon. Members, including my hon. Friend the Member for Moray (Mr. Pollock), to the statement made by the former Secretary of State for Scotland—my right hon. Friend the Member for Ayr (Mr. Younger)—on the Forestry Commission. That remains Government policy.

Electricity Generation

Mr. Wallace: asked the Secretary of State for Scotland what he estimates the excess electricity generating capacity will be over peak demand in Scotland, after the commissioning of the nuclear power station at Torness.

Mr. Rifkind: The preparation of demand forecasts is a matter for the Scottish electricity boards. They estimate that in 1989–90, by which time the Torness nuclear station will be fully operational, the plant capacity additional to that required solely to meet the maximum demand with planned security is likely to be 27 per cent. This excludes oil-fired capacity placed in reserve and does not allow for any exports in the course of trading with England and Wales.

Mr. Wallace: As the Secretary of State said earlier that the Government were in no case to do anything, presumably in the context of the nuclear industry, will he confirm, or deny, that the South of Scotland Electricity Board has been withdrawing staff from other plants to put them into Torness to hasten commissioning of the reactor? In view of the Chernobyl incident and the fact that, once commissioned, the plant will at some stage have to be decommissioned, with all that that entails in relation to the production of nuclear waste, and in view of current oil prices, would it not be better to bring Inverkip out of mothballs and keep Torness in mothballs?

Mr. Rifkind: I have no information on the first point. On the more general proposition, the hon. Gentleman should appreciate that it is in the interests of Scotland to have the maximum of cheap electricity for industry and for the consumer. As the hon. Gentleman knows, that is not only my view but that of his Social Democratic colleagues in the alliance, and it is a view widely held in many parts of Scotland, except in some of the circles in which the hon. Gentleman mixes.

Mr. Willie W. Hamilton: Assuming that Torness is to be commissioned before the next election, what plans are being prepared for the evacuation of people living near the plant in the event of a Chernobyl-type disaster? If such plans do not exist, will the Secretary of State ensure that plans are prepared and that they are published?

Mr. Rifkind: The hon. Gentleman should be aware that the Government have given particular importance to issues such as civil defence and how to deal with any emergencies that may take place. The hon. Gentleman and his colleagues have utterly opposed any attempt to encourage local authorities and others to participate in normal sensible preparation for any problems that might arise involving power stations or any part of the local community. Notwithstanding that, the South of Scotland

Electricity Board and all responsible public authorities take into account the need for proper provision for any incident that might take place. The hon. Gentleman should also be aware that the record of the nuclear industry in Scotland and in the United Kingdom over the past 30 years has no equal anywhere in the world.

Mr. Fairbairn: Will my right hon. and learned Friend confirm that the purpose of Torness is to provide cheap electricity for those for whom the Opposition consistently bay in favour of a cheaper way of life and that there is no risk of a Chernobyl-type disaster at Torness because of our safety standards? Will he further confirm that a British Conservative Government, unlike the Socialist Government in Russia, would not cynically keep secret such an accident regardless of the consequences?

Mr. Rifkind: No doubt consideration of the kind to which my hon. and learned Friend referred in the first part of his question led to the Labour Government ordering Torness, the hon. Member for East Lothian (Mr. Home Robertson) supporting its construction and the present leader of the Labour party declining to enforce its decommissioning.

Local Government Finance

Mr. MacKenzie: asked the Secretary of State for Scotland when he next proposes to meet the officers of Convention of Scottish Local Authorities to discuss the matter of local government finance.

Mr. Ancram: My right hon. and learned Friend next plans to discuss local government finance matters with the convention on 18 July.

Mr. MacKenzie: Will the Minister bear in mind that as a result of the recent elections officers of the convention have a massive mandate to tell the Secretary of State that they do not approve of his massive interference in the management of local government finance and that there is massive opposition to rate reform as envisaged by the Secretary of State? Will he take those two points on board and really listen to what the officers have to say?

Mr. Ancram: We shall obviously listen to what representatives of the convention have to say when the meeting takes place. The idea of the Government being able to take an overview of local authority spending did not come about under the present Government. Indeed, it was one of the right hon. Gentleman's colleagues in government who told local authorities in 1976 that the party was over because they were overspending. There are still local authorities in Scotland which intend to spend more in real terms than they were spending in 1979. The Government have an interest in ensuring that that expenditure is properly restrained.
It is interesting to note that those who oppose rate reform have no thought-out alternative to put in its place.
Only the Government have been prepared to grasp the nettle to get rid of the present totally discredited rating system.

Mr. McQuarrie: When my hon. Friend meets representative of COSLA, will he take the opportunity to discuss with them the question of increasing employment through the Prime Minister's decision to clear the streets of litter? When he discusses that question, will he actively promote further jobs in urban areas in order to ensure that the streets of Scotland are kept clean?

Mr. Ancram: Obviously we shall want to examine closely the proposals that are being made for the clearing of litter south of the border to see how they can be used in Scotland. The collection and disposal of rubbish and litter are, in my view, not necessarily best done by local authorities. Indeed, we have encouraged local authorities over a long period to put out to tender those services to see whether they can be more efficiently and better done.

Mr. Bruce: Will the Minister recognise, whether COSLA makes the point to him or not, that there is real concern that the introduction of a poll tax will unfairly affect residents in rural areas? Will he take that concern on board and recognise that rural authorities will need more resources to maintain services, given that the Government refuse to set up a rural development fund?

Mr. Ancram: If the hon. Gentleman were to consider the indicative figures that we put out at the time of the publication of the Green Paper as to the likely levels of community charge, he would find that it is precisely in rural areas that those charges are likely to be lowest.

Oral Answers to Questions — SOLICITOR-GENERAL FOR SCOTLAND

Assembly Building

Mr. Canavan: asked the Solicitor-General for Scotland what area of the Scottish Assembly building in Edinburgh is currently used by him, by the Lord Advocate and by their staff.

The Solicitor-General for Scotland (Mr. Peter Fraser): As I have indicated previously to the hon. Gentleman, Crown Office buildings are fully occupied as office accommodation with the exception of the debating chamber, a lobby and a press room.

Mr. Canavan: Is it not an absolute national scandal that the debating chamber of the Scottish Assembly building is lying empty and unused for most of the time because this Tory Government are refusing to respond to the legitimate demands of the majority of the people of Scotland, who want a democratically elected Scottish Assembly instead of being ruled by an undemocratic Tory junta which has received no mandate from the people of Scotland?

The Solicitor-General for Scotland: The chamber would have been much better used if a number of the hon. Gentleman's colleagues had attended the last time the Scottish Grand Committee held its meeting there. As part of a Government who have done more than any of their predecessors to reform the private law of Scotland since 1979, in my view we are much better to concentrate our efforts on that than to waste months of parliamentary time putting together another unworkable scheme.

Mr. Bill Walker: Does my hon and learned Friend agree that the lack of interest shown by the Scottish people in the meetings of the Scottish Grand Committee that have taken place in Edinburgh, and the lack of attendance of Labour Members, which was referred to by my hon. and learned Friend, and of other Opposition Members shows clearly that the debating chamber is best left empty for most of the time?

The Solicitor-General for Scotland: Certainly, there has not been much of a turn-out recently either of hon. Members or of the public, although in the past we have

taken the oportunity of using the Scottish Grand Committee meetings in Edinburgh to put forward the legislation and the reform of which I have already made mention.

Mr. Wallace: Does the Solicitor-General agree that if the Royal High school building was used for a Scottish Assembly it might generate more interest among his colleagues than is witnessed today by the lack of interest in this place, where not one Scottish Conservative Member has a question on the Order Paper?

The Solicitor-General for Scotland: Attendance at meetings of the Scottish Grand Committee in Edinburgh has been thin, as the hon. Gentleman will have noticed if he has been there. If he wants to encourage greater use of the building, I am sure he knows how to set about it.

Mr. Michael Forsyth: Does my hon. and learned Friend agree that, rather than go through the farce of wasting vast sums of public money on running the Scottish Grand Committee meetings in that building, it would be better to sell it and use the resources on the Health Service or on something useful in Scotland, given that his Department survived without it in the past, and as the people of Scotland certainly do not want a Scottish Assembly?

The Solicitor-General for Scotland: Much as I appreciate the architecture of the Royal High school building in Edinburgh, as Solicitor-General I believe that the sooner we can move out of it and return to a proper Crown Office, the better.

Mr. Dewar: Will the Solicitor-General expand on that last remark? He appeared to support the hon. Member for Stirling (Mr. Forsyth) and his scheme. Is that the Solicitor-General's personal view? Will he note that the Opposition are strongly in favour of continuing the present practice of meeting in Edinburgh as a prelude to the day when we have a Scottish Assembly properly established there?

The Solicitor-General for Scotland: I thought that I said clearly that at present the Crown Office occupies the greater part of the building. As a lawyer, the hon. Gentleman will appreciate that Crown Office activities are to some extent separated not only from the Court of Session and the High Court, but from the sheriff court in Edinburgh. It would be much more appropriate for my Department to be closer to those courts. There are a number of possibilities for the future use of the building, but I certainly would not suggest that it would be right to use it for a Scottish Assembly.

Criminal Justice Act 1980

Mr. Maxton: asked the Solicitor-General for Scotland when he intends to meet procurators fiscal in Scotland to discuss the use of evidence in courts obtained under part I of the Criminal Justice Act 1980.

The Solicitor-General for Scotland: I meet procurators fiscal from time to time to discuss various matters, including the 1980 Act, but no particular meeting is planned to discuss evidence under part I.

Mr. Maxton: Does the Solicitor-General remember, when he was a mere Back Bencher serving on the Committee on that Bill, that his right hon. and learned Friend the Secretary of State, then a junior Minister,


promised that there would be research into the working of detention powers? Is it correct that that research was carried out and that a report was produced in March 1985, which went to the Association of Chief Police Officers (Scotland), which demanded that it be repressed and that no further research be carried out? Will he now ensure that that report is published?

The Solicitor-General for Scotland: That is a searching and compelling question, but it is inappropriately addressed to me. It is for my right hon. and learned Friend the Secretary of State.

Police (Complaints)

Mr. Foulkes: asked the Solicitor-General for Scotland how many complaints against the police in Scotland have been referred from procurators fiscal to the Lord Advocate for advice or decision.

The Solicitor-General for Scotland: To date this year, 142 cases of complaints against the police have been reported by regional procurators fiscal to the Crown Office for consideration by Crown counsel. In 1985, 493 cases were reported. Such cases are seen by me and occasionally by my noble and learned Friend the Lord Advocate.

Mr. Foulkes: I am most grateful to the Solicitor-General for that reply. Will he give serious consideration to an examination by his Department into whether the police are referring to the procurators fiscal complaints which have nothing to do with the alleged offences? When the procurators fiscal say that they will take no action, it gives some spurious exoneration to the person under complaint. If that examination shows that that is the case, will the Solicitor-General give further consideration to the possibility of an independent complaints procedure for complaints against the police, in which the Scottish public would have much greater confidence?

The Solicitor-General for Scotland: The hon. Gentleman raises a serious and difficult matter. There are occasions when the police cannot immediately identify a complaint and when it would be inappropriate for them to reach a conclusion on whether it is purely a disciplinary matter or one which contains an allegation of criminal conduct by the police. Clearly, in those circumstances they tend to veer on the side of caution. They certainly put some cases which do not have a criminal content to procurators fiscal and the Crown Office. I am not sure that that causes the difficulties that the hon. Gentleman mentions, but I am prepared to look into the matter.

Mr. Fairbairn: Will my hon. and learned Friend confirm that all complaints against the police are reported to a Law Officer and are scrutinised by him, or his noble and learned Friend the Lord Advocate, so that the highest consideration is given to any complaint of alleged abuse by the police?

The Solicitor-General for Scotland: Yes, I can confirm that matters have not changed and that the policy has not been altered since my hon. and learned Friend had these responsibilities. Not everyone is involved if it is only a matter of a possible breach of disciplinary code within the police. Furthermore, if it is a complaint which clearly has no substance, it is not reported to Crown counsel or

to one of the Law Officers. Otherwise, as I said, a considerable number of complaints are personally examined by me or by my noble and learned Friend the Lord Advocate.

Dr. Godman: Of the 400 or so complaints, how many originated in Greenock and Port Glasgow, and of those how many led to disciplinary or criminal proceedings, being taken?

The Solicitor-General for Scotland: The hon. Gentleman has me at a loss. I am not able to tell hum immediately what the Greenock and Port Glasgow figures are, and I cannot tell him how many of them resulted in disciplinary proceedings, because the pursuit of disciplinary proceedings would be a matter for the assistant chief constable and the chief constable rather than my self. Those instructions would come from me only if there was a decision to proceed with criminal proceedings against a police officer.

Mr. Henderson: Does my hon. and learned Friend accept that while one wants to see complaints made against the police properly and fully investigated, it is equally important, when frivolous or malicious complaints are made, that the full rigour of the law is taken against people who distract the police and other officers of justice from their proper duties?

The Solicitor-General for Scotland: Yes, indeed. The policy is clear. If at some stage it is identified that the complaint is in any way malicious or is a wilful effort to waste the time of the police, often to secure a balance, proceedings are taken against those who make the malicious complaints.

Procurator Fiscal (Kilmarnock)

Mr. McKelvey: asked the Solicitor-General for Scotland if he plans to meet procurators fiscal in Kilmarnock to discuss matters of accommodation.

The Solicitor-General for Scotland: I have no immediate plans to discuss matters of accommodation with the procurator fiscal at Kilmarnock. His accommodation problems are well understood. The planned solution is to relocate his office in the old Kilmarnock sheriff court house once that building has been vacated.

Mr. McKelvey: Can the Solicitor-General for Scotland tell me whether the Crown Office has, therefore, approved the sketch plans for the refurbishment and redevelopment of the old Kilmarnock sheriff court? If it has done so, would he perhaps discuss with his colleague, the Under-Secretary of State for the Environment, the possibilities of Government funding to give that project the go-ahead?

The Solicitor-General for Scotland: As I said in my original answer, it is certainly the intention to relocate. That is a policy which my noble and learned Friend the Lord Advocate and I warmly support. A considerable amount of work has already been done on that, but, as the hon. Gentleman appreciates, funds have not yet been committed to it. However, we certainly want to see the project go ahead.

Scottish Question Time

Mr. George Foulkes: On a point of order, Mr. Speaker. On previous occasions some of my colleagues have asked you to take account of the fact that, in comparison with other Question Times, where Government members are in excess, at Scottish Question Time there are twice as many Scottish Labour Members as Scottish Tory Members. On this occasion, Scottish Tory Members have tabled only one question, and that was by the hon. Member for Dumfries (Sir H. Monro) who was not even present. In addition——

Mr. Speaker: Order. I did exactly that today. If the hon. Gentleman looks carefully at Hansard tomorrow, he will see exactly what happened.

Mr. Foulkes: I am grateful to you, Mr. Speaker. I was about to conclude by saying that in addition to that there were only six Tory Back Benchers present. I shall look at Hansard tomorrow, but I was counting up. For example, the hon. Member for Stirling (Mr. Forsyth), who did not table a question, was called on three or four occasions.

Mr. Speaker: Order. That is my discretion. However, if the hon. Gentleman looks at Hansard tomorrow, he will find that Opposition Members were called much more frequently. It is always my endeavour at Question Time to call those hon. Members who have questions on the Order Paper if they can be broadly linked. Furthermore, I endeavour to give everyone an opportunity of being called at least once.

Mr. Bill Walker: On a point of order, Mr. Speaker.

Mr. Dennis Canavan: Further to that point of order, Mr. Speaker.

Mr. Speaker: Order. I shall take Mr. Bill Walker's point of order first.

Mr. Bill Walker: Mr. Speaker, can you confirm that when the House is taking questions on what are considered to be United Kingdom matters, Conservative Members expect the questions, quite properly in my view, to go from one side to the other and that is what happens? No cognisance is taken of the fact that there are many more Conservative Members present during what could be called United Kingdom questions, yet, unlike what the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) is calling for, no allowance is made for that.

Mr. Speaker: Order. I do not propose to enter into a debate with the House on how I call hon. Members at Question Time.

Mr. Canavan: The hon. Member for Eastwood (Mr. Stewart) was not present to answer questions this afternoon because, as I understand it, he is in Mexico for the World Cup finals. In view of the fact that the hon. Member is not only the Scottish Minister for sport but the Scottish Minister for industry, with a track record of scoring own goals against Scottish industry, can we have an assurance that he is in Mexico simply as a spectator and not as a replacement for Kenny Dalgliesh?

Mr. Speaker: Order. I think that we should move on.

Mr. Victor Paige

Mr. Frank Dobson: (by private notice)asked the Secretary of State for Social Services if he will make a statement on the resignation of Mr. Victor Paige from the chairmanship of the National Health Service Board.

The Secretary of State for Social Services (Mr. Norman Fowler): In October 1983 I announced that the Government accepted the recommendations of the NHS management inquiry, under the chairmanship of Sir Roy Griffiths, that general management should be introduced into the NHS, and that a board should be set up within my Department to be responsible to Ministers for the Department's functions in relation to the management of the NHS.
Mr. Victor Paige took up appointment as chairman of the board, and as second permanent secretary within my Department, on 2 January 1985. His contract was for three years. The board was established in April 1985 and contains members drawn from business, the National Health Service and the Civil Service. Mr. Paige has paid tribute to the abilities of the Board and the progress the board has already made. I should like to express my thanks to Mr. Paige for his part in that progress.
I confirm that substantial improvements have already been made in the efficient management of the NHS. Those achievements reflect great credit on the Health Service itself, including authorities, managers and staff, and on the direction and leadership which the service has had from my Department.
As the House will be aware, Mr. Paige has resigned his position as chairman of the management board. He discussed his intention with me, and we agreed that it would be right for him to stand down. I have published in full the exchange of letters between us in which Mr. Paige explained his reasons. There is nothing that I can add to what he has said and my reply. I have therefore appointed Mr. Len Peach, who is the board's director of personnel on secondment from IBM, as acting chairman of the board. I shall make a substantive appointment as soon as possible.
The Government remain fully committed to better management of the National Health Service. I have every confidence that, under the leadership of the management board, health authorities and their general managers will continue to ensure that more and better care is provided for patients and that the best value for money is obtained.

Mr. Dobson: The statement raises more questions than it answers.
Will the Secretary of State tell the House precisely why Mr. Paige gave up his £70,000 a year job in mid-contract? Did he jump, or was he pushed? Was he pressed for too many or too few cuts? Does his departure leave in tatters the policy of bringing private bosses into the National Health Service? Is it true that, in the past two months, three similar appointees have resigned as district managers — three out of the 25 outsiders? Is it true that the business genius who was appointed to head an audit into value for money in the NHS has just gone bankrupt to the tune of £300,000?
Does the Secretary of State agree that his policy is wrong, or is it just that he is a bad judge of people? Will


he now appoint someone from the thousands who have made the NHS their life's work and not appoint another rank outsider with no staying power? Will he ensure that the new person uses the National Health Service instead of relying on the private sector?

Mr. Fowler: I do not accept what the hon. Gentleman has said. Mr. Paige set out the reasons in his letter. I do not think that there would be much point in my trying to interpret further what he said. There was no question of disagreement about resources. We have 750 general managers in post, and two or three have left. That shows the confidence in the concept of general management. I think that the hon. Gentleman will concede that Mr. Paige himself endorsed the concept of general management.
Substantial achievements have already been made. Indeed, £150 million of cost improvements have been made. The concept of identifying one person as being responsible and accountable for ensuring that decisions are made and that action is taken can only be right. We have no intention whatever of turning our backs on the general management concept. That concept is in the interest of the Health Service, and it is about time that the hon. Gentleman supported it.

Mr. Robert McCrindle: Although one regrets Mr. Paige's departure, is not the important point that the concept of general management is now sufficiently well established — notwithstanding Mr. Paige's decision to go—and that very few people, other than one or two Opposition Members, would want to return to the old idea of a bloated bureaucracy? Does my right hon. Friend concede that, if any lesson is to be learnt, it is perhaps that Mr. Paige's successor should be given even more support, if that is possible, in standing up to the vested interests in the NHS, who have no interest in the NHS running on a commercial basis?

Mr. Fowler: There is much truth in that, and particularly in my hon. Friend's opening remarks. The general management concept is accepted in the NHS. As the Institute of Health Service Management has said in a statement made during the past 24 hours, general management is beginning to work very well, and the NHS will provide better quality care and value for money as a result. That is why general management is important, and that is why it will and should continue.

Mr. Archy Kirkwood: Irrespective of one's view about the principles of general management, is there not widespread concern about the way that it is being implemented? Following Mr. Paige's unfortunate resignation, will the right hon. Gentleman undertake a review of the implementation of unit management policy? Does the Secretary of State have any intention of reviewing the new incumbent's terms of reference?

Mr. Fowler: No, I do not think that that is necessary. The managment board is carrying out an important job. It continues in post, although obviously with the exception of Mr. Paige. and it will continue to do its work. Mr. Len Peach, the acting chairman, comes from outside industry, and is a man of enormous experience. I believe that the management board will establish itself and will continue to achieve great things for the NHS.

Sir William Clark: Does my right hon. Friend agree that management by committee cannot

be very effective? Does he further agree that trying to manage by consensus must lead to inefficiency? Surely it is high time that we returned to a system of one person in a hospital being responsible for all management. That would be much better than having many committees, with one looking after provisions, one looking after beds. one looking after cleaning, and so on, without any one person being in charge. That is the problem in the NHS.

Mr. Fowler: My hon. Friend is absolutely right, and that is why general managers are being introduced. not just at the regional or district level, but, most importantly, as my hon. Friend said, at the hospital or unit level. That is the philosophy behind what we are doing. The concept involves identifying the person responsible and accountable for ensuring that decisions are made and that actions are taken. It replaces the old unsatisfactory system which in, for example, the Stanley Royd case might lead to great tragedies for the NHS.

Mr. Frank Haynes: Why does not the Secretary of State come clean? He knows very well that Mr. Paige was not prepared to be shoved round by him and his Department. The right hon. Gentleman talked about Mr. Paige's resignation, but we need the right hon. Gentleman's resignation on the table.

Mr. Fowler: I have endured three months of the hon. Gentleman during the proceedings in Committee on the Social Security Bill and I suppose I can take a little more than that. However, his comments on the NHS are no nearer the mark than any of his comments on social security matters.

Mr. Robert B. Jones: I thank my right hon. Friend for his tribute to my constituent, Mr. Victor Paige, and his work in the NHS. Mr. Paige, together with my right hon. Friend and many Conservative Members, is deeply committed to the idea of general management because of the result that it has already produced. Is my right hon. Friend aware that the 25 per cent. more nurses at the Hemel Hempstead hospital in my constituency are paid for partly by the efficiency savings that have been brought about by strong general management? Will my right hon. Friend confirm that the terms of reference for the new chairman will not only be the same as those for the previous chairman but will be redoubled in an effort to obtain efficiency?

Mr. Fowler: I am grateful for what my hon. Friend has said. We have already achieved £150 million in the cost improvement programme. That money goes directly into the Health Service and is valuable to it.

Mr. D. N. Campbell-Savours: Does not this affair show that one cannot impose the blunt instrument of commercial markets on what is effectively a social service? Why does not the Secretary of State tell the truth? Why in his reply to my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) did he stick so religiously to his brief? Why does he not tell us what really happened and what arguments have taken place in the past two months between Mr. Victor Paige and the departmental Ministers on the running of the service?

Mr. Fowler: With great respect to the hon. Gentleman, it would be——

Mr. Campbell-Savours: We know what has happened.

Mr. Fowler: We have exchanged letters on this matter. Mr. Paige has put out his reasons for resigning, and I have replied to them. We agreed that it would be right for Mr. Paige to step down.

Mr. Roger Sims: Does my right hon. Friend agree that, in his letter, Mr. Victor Paige does more than endorse management principles; he warmly and enthusiastically supports them? Does he further agree that the management of the NHS is, as Mr. Paige has said, complex? Is it not inevitable that there will be difficulties in introducing business management methods into this enormous concern, which covers professional people and staff in catering, laundering, cleaning and many other activities, all of whom have traditional but inefficient practices? Is my right hon. Friend aware that we shall fully support the new chairman, when he is appointed, in helping him to rid the Health Service of these practices and to achieve efficient business management within the NHS?

Mr. Fowler: I am grateful to my hon. Friend. The Health Service is a complex management job, and it employs about 1 million people. The Griffiths report recognised that complexity, and Mr. Paige's achievement has been that he has taken the management process to stage one and, in particular, to the stage when general managers have been appointed almost entirely throughout the country.

Mr. David Winnick: Is the Secretary of State aware that, while people may not care too much either way about Mr. Paige, they are aware that there is insufficient funding of the National Health Service resulting in continued cuts, lengthy waiting lists and closures? Is he also aware that there is no lack of understanding on the part of the public regarding the Conservative party's attitude to the NHS? It has no genuine commitment to the NHS, and it would not stay in power for five minutes were it not for electoral reasons.

Mr. Fowler: There is nothing in the resignation of Mr. Paige to do with the question of more resources. The attitude of the Conservative Government to the Health Service is shown by the fact that we are spending £18·75 billion on the Health Service, which is a 24 per cent. real increase on what the last Labour Government spent.

Mrs. Edwina Currie: Will my right hon. Friend take on board Mr. Paige's two comments about improving employees' commitment and the importance of management education? Does he agree that we are lucky to have a large number of committed and able people within the NHS who, with a little encouragement and a dollop of that management education, might provide the general managers of the future, whom Mr. Paige rightly regards as vital to the future of the NHS?

Mr. Fowler: That is an important point, particularly in relation to management education. The new acting chairman of the management board, Len Peach, with his experience will be well placed to implement just that.

Mr. Charles Kennedy: Do not the terms of Mr. Victor Paige's resignation letter to the Secretary of State make abundantly clear the Government's absolute folly when they decided to implement the Griffiths report wholesale and appoint 750 general managers throughout the country, creating this new edifice of which Mr. Victor Paige was the top point, without bothering to test the Griffiths report in pilot schemes in different health authorities throughout the country?
As the Secretary of State has laid such emphasis on the need for general management and lines of responsibility, does he not feel that what comes through loud and clear from this resignation is that, instead of decisions being taken in the front line, they were being referred more and more up the line to the Elephant and Castle and that they were falling victim to personalities and politics there?

Mr. Fowler: No, I do not think that that is the case. The concept of general management is that decisions should go down the line to the hospital and to the districts, and that is what is taking place. I have heard before what the hon. Gentleman has said about pilot schemes, but I do not think that that is a very sensible way of introducing the concept of general management into the Health Service. I certainly do not think that if we had done it that way we should have secured anything like the cost improvements that we have managed to secure under the plans and policies that we have implemented.

Several Hon. Members: rose——

Mr. Speaker: Order. This is a private notice question. I shall allow one more question from a Member on each side of the House.

Mr. Michael Morris: Is my right hon. Friend aware that, although the National Health Service management board has been in existence for just over a year, much of the best work that it has done has been in recent months, particularly in its evidence to the Public Accounts Committee? Is he able to give a commitment to the House that this work will continue with even more rapidity than before, even while we are awaiting the appointment of a new chairman?

Mr. Fowler: Yes, entirely. I am grateful for what my hon. Friend has said. The work of the management board will go on as usual. I can give him totally that assurance.

Mr. Tam Dalyell: What estimable qualities other than those possessed by Mr. Paige is the Secretary of State looking for in his successor?

Mr. Fowler: We need someone with management experience and I think, above all, with a commitment to the National Health Service.

Legionnaire's Disease (Badenoch Report)

The Minister for Health (Mr. Barney Hayhoe): With permission, Mr. Speaker, I will make a statement about the first report of the Badenoch committee of inquiry into the outbreak of legionnaire's disease in Stafford.
The outbreak at Stafford district general hospital occurred in April 1985: 101 patients caught the disease and there were 28 deaths. This was the second most serious incident ever recorded, surpassed only by the outbreak in Pennsylvania in 1976 from which the disease was first recognised. The source of infection was traced to the air conditioning system. My right hon. Friend the Secretary of State for Social Services appointed a statutory public inquiry on 7 June 1985, chaired by Sir John Badenoch.
The inquiry has produced a first report covering the Stafford outbreak and has also made recommendations more generally about hospital air conditioning systems. The inquiry will now consider and make recommendations on action to reduce the possibility of future outbreaks, whether in hospitals, other buildings or elsewhere, and the Government expect to receive this second report around the turn of the year. The first report concludes that, on present knowledge, the outbreak at Stafford cannot be attributed to any single factor, nor does it hold any individual or group directly responsible. It points out that legionnaire's disease has only recently been identified and is not well understood. The report refers to a combination of circumstances which appear to have contributed to this outbreak.
These circumstances include defects in the design and construction of engineering services, problems during the commissioning of the air conditioning plant, lack of knowledge and understanding of the sophisticated engineering plant, shortcomings in maintenance, including chlorination, and the weather conditions. The report also points to the inherent difficulty on present knowledge of eliminating the legionella bacillus in water spray cooling towers used for air conditioning.
The report praises those who cared for the infected patients and I gladly endorse this tribute. The report makes recommendations specific to the circumstances surrounding the outbreak and requiring local action. In particular, it calls for a review of the health authority's microbiological services in Stafford. I am asking the West Midlands regional health authority and the Mid-Staffordshire district health authority to report within three months on the follow-up action they have taken or intend to take.
Revised guidance on the maintenance of cooling towers was issued to health authorities in January 1986 following consultation with Sir John Badenoch. This reflects the lessons learned at that stage from the inquiry. In the light of the completed report, the Department has today issued a further circular to health authorities asking them to check for features similar to those found at Stafford and to take appropriate action. They are also being asked to ensure that existing guidance on maintenance is being followed and that operational engineering staff have access to detailed guidance on the operation of individual water spray cooling systems.
The recommended code of practice for hospital engineers should be available by about the end of the year. In the meantime, discussions are in hand with the Public Health Laboratory Service to establish a register of engineers so that relevant expertise can be available if needed by the Communicable Disease Surveillance Centre and health authorities.
The inquiry recommended that a committee of experts should be convened urgently to consider all aspects of the use of biocides as a means of minimising build up of legionella. This committee will be chaired by Dr. A. E. Wright, director of the Public Health Laboratory Service Newcastle laboratory, and will begin its work shortly.
Other recommendations dealt with reducing reliance on air conditioning in general and water spray cooling towers in particular. Current hospital building policy, with its emphasis on smaller hospitals, means that new hospitals generally use less air conditioning than before. Preliminary inquiries indicate that no new water spray cooling towers will be incorporated in hospitals currently being planned. The inquiry's conclusions will reinforce the commitment to air-cooled systems for new hospital building.
As regards existing hospitals, health authorities have been asked to give details about the type and number of water spray systems now in use, as a first step to carrying out the recommendation that urgent consideration should be given to their replacement. Only a minority of hospitals are thought to have such systems, but the inquiry will establish an accurate national picture. I understand that the inquiry team did not envisage immediate replacement of such systems; it was concerned to ensure that existing systems operate as safely as possible and those which have reached the end of their natural life or present particular maintenance problems should have priority for replacement.
Early action was taken with the two health notices in July 1985 and January 1986 and further instructions, based upon this first report, have now been issued to health authorities. These steps will reduce the risk of any repetition of the outbreak. Production of a code of practice and setting up the register of engineers experienced in this field will also contribute to that end. In the longer term, the new committee on biocides should help to clarify how these chemicals can best be used to reduce risks further. Information is being collected about existing hospital water spray cooling systems as a first step in the consideration of their longer-term future.
We owe a great deal to Sir John Badenoch and his fellow inquiry members for the energy and application they have brought to producing this report. For the broader questions about what may need to be done to reduce any risk from the disease in other circumstances in hospitals, other buildings and elsewhere, the Government look forward to the second report, which is expected around the turn of the year.

Mr. Frank Dobson: I join the Minister in thanking Sir John Badenoch and his colleagues for the work that t hey have done in the inquiry. As the Minister has said, the findings of the committee have revealed a considerable number of shortcomings. There are many uncertainties surrounding even that which happened at Stafford, and there are even more uncertainties about the knowledge, development and spread of legionnaire's disease generally.
Even the first report has implications for other hospitals in other areas, and it is not entirely clear from the Minister's statement whether the Government fully accept all the recommendations within it. I should like the Minister to be specific about that. Will he tell us whether the Government intend to find the extra staff and money that will be necessary for the investigation of the cooling systems at other hospitals and for any adaptations and replacements that may be necessary?
Does the Minister accept the committee's recommendation that there should be further research into legionnaire's disease? If he does, is he satisfied that there are presently only two Government-funded research projects into legionnaire's disease? Given the tribute that has been paid to the Public Health Laboratory Service and the Communicable Disease Surveillance Centre in the report, will he reaffirm that the Government have abandoned any intention of interfering with the Public Health Laboratory Service, or to abolish it or the Communicable Disease Surveillance Centre, which were around at the time of the outbreak.
Although this is not covered by the report, I should like to know whether the final report will cover the action taken by the Minister's Department? To be fair to the Minister, that was action taken before he became the Minister for Health. Is the right hon. Gentleman satisfied that no fewer than five days elapsed between his office at the Elephant and Castle being informed that the Stafford hospital people believed that legionnaire's disease was caused by their water cooling system and the Department informing other health authorities with hospitals with identical cooling systems of what had happened at Stafford?

Mr. Hayhoe: I am grateful for the hon. Gentleman's comments about Sir John and his colleagues. As a first step towards achieving urgent consideration about whether to replace existing spray systems, we have called for the establishment of the precise situation throughout the country. I understand that there are about 400 water spray cooling towers now in place, and we shall need to consider the details of the installations.
The assessment of where we stand can be undertaken notwithstanding resource implications within existing budgets. The immediate priority for health authorities must be to ensure that the existing equipment is correctly and safely maintained. These instructions have already gone out and they will be reinforced by the publication of the report and by the further health notice which is being issued.
Legionnaire's disease is affecting countries throughout the world and I am not aware of any research projects that are not being followed through. I would be prepared to give consideration to any suggestions that come forward and to pass them on to those responsible for medical research.
The hon. Gentleman made some rather exaggerated comments about the Public Health Laboratory Service and a report which was produced earlier this year. My right hon. Friend the Secretary of State made it clear quickly that he did not accept the proposals in the report and that he wished the service to continue in its existing form. My right hon. Friend's clear undertaking remains.
The content of Sir John's final report will be a matter for him and his colleagues and not for me.

Mr. William Cash: I welcome my right hon. Friend's statement, the Badenoch report and the Government's immediate response last year to my call for a full independent inquiry, but will my right hon. Friend accept that some serious criticisms are contained in the report that show that the sort of action that is outlined in the report is necessary? Will he join me in extending sympathy to those who were bereaved during the course of the outbreak of legionnaire's disease in my constituency? Will he ensure that appropriate praise is given to the nursing staff for the wonderful work that it conducted in difficult and dangerous circumstances while the outbreak was continuing?

Mr. Hayhoe: Yes, I join my hon. Friend in his expressions of sympathy, which have been made in the House before and which, I am sure, will be reiterated in all parts of it, to the relatives and friends of those who suffered. I endorse the tribute which was paid in the report and paid previously by my predecessor and by the hon. Member for Holborn and St. Pancras (Mr. Dobson) to the staff. Anyone who reads the report of the inquiry will see that tribute is paid in unstinted fashion to those who had the care of the patients who, alas, suffered from this serious infection. I congratulate my hon. Friend, whose assiduous attention to detail as the constituency Member has rightly won admiration and praise in all parts of the House.

Mr. Archy Kirkwood: I associate my right hon. and hon. Friends with the comments that have been made about the sympathy that we should extend to the relatives of those who died in this tragic incident and the tribute that we should pay to the heroic efforts of the staff who put it right. We owe a debt to Sir John Badenoch for the expedition with which he has produced the report.
Can the Minister confirm that DHSS maintenance standards for the cooling towers are upheld and that the proper recommended procedures are followed? I understand from his statement that he found that there were maintenance defects. Has he considered the use of biocides such as Hatacide LP5 as a replacement for chlorination, as chlorination has been found to be defective, and certainly in the conditions found in modern water spray cooling systems?
Secondly, the Minister will know from the expert advice that he has been receiving that old people are especially vulnerable to legionnaire's disease. He has said that 400 institutions have water spray cooling systems, and I ask him to give especial attention and priority to those that accommodate elderly people, who are particularly at risk. If he finds that there are still suspect systems, will he ensure that no expense is spared in replacing equipment?

Mr. Hayhoe: I am grateful to the hon. Gentleman for what he has said about extending sympathy to the relatives of those who died. He has addressed himself to the maintenance of the air conditioning plant at Stafford and, as I said earlier, the report reveals a number of defects in design, installation, maintenance and chlorination which appear to have contributed to the outbreak of the disease. The inquiry was not able to point the finger precisely at any one specific failure or cause. The infection appeared to start on 9 April and appeared to cease on 19 April. The


cessation may have been contributed to by a change in weather conditions, but there is still no absolutely clear reason why the outbreak started and why it ended.
The way in which infections of this particular organism have been found to operate in different parts of the world at different times makes it extremely difficult to be precise and specific about the causes. The hon. Gentleman has referred to the use of biocides and he will have heard me say that we have accepted the recommendation that an expert committee should consider the issue. I have said that Dr. Wright, who is a distinguished expert in this area, will be chairing the committee. I hope that the membership of it will be established pretty soon and that it will get to work without delay.
The hon. Member for Holborn and St. Pancras (Mr. Dobson) was right to draw attention to the vulnerability of old people to infection. People who have suffered from chronic infections and, indeed, those who have been heavy smokers also appear to be vulnerable. They all appear to be more liable to be adversely affected by the infection. The hon. Gentleman's point about the water spray cooling towers, and their relationship to institutions where there are people with particular vulnerability, such as the old, will be taken into account.

Mr. John Heddle (Mid-Staffordshire): May I associate myself with my right hon. Friend's kind and generous remarks about the care bestowed by the staff at Stafford hospital, particularly the care for my constituents, who are just five miles away from Stafford hospital? Will my right hon. Friend confirm that also about five miles away is Meaford power station? Have he and the inquiry completely eliminated the possibility of a correlation between the water cooling system of Meaford power station and legionnaire's disease? Has my right hon. Friend satisfied himself that the committee has ensured, through any consultations that it may have had with the Central Electricity Generating Board and others, that there was no connection? Will he confirm that the most rigorous inquiry has taken place as to the efficacy of the water cooling system at Stafford general hospital and, indeed, the quality of maintenance of the water cooling system?

Mr. Hayhoe: I am grateful to my hon. Friend for his comments and his endorsement of the tribute to the staff concerned. He will have personal knowledge of that because some of his constituents were affected. A connection with the water cooling systems in nearby power stations has not been established, nor, I suggest—although I do so subject to correction—has it been totally eliminated. As far as I can judge from the scientific and engineering evidence that is coming forward, it is extremely difficult to be absolutely positive either for or against any proposition in this area. It has become clear that the organism that led to the deaths and illness of those affected in the outbreak was identified as being in the air conditioning system. Cooling tower No. 4 had a connection with the outpatients' department where, as far as one can judge, the majority of those who were affected picked up the infection.

Mr. Jeremy Corbyn: What steps will be taken to ensure that employees of the National Health Service are made aware of the contents of the Badenoch report, and what steps will be taken to ensure that sufficient training is given to staff in the NHS to

overcome any problems arising from the changes that will be necessary as a result of the recommendations in the report?
Secondly, will the right hon. Gentleman assure the House that any changes that have to be made to NHS equipment in any hospital as a result of the report will be paid for out of central funds, not out of local district health authority funds, so that they will not be set against the costs of existing services and staff?
When the final report is ready, and if any changes are required in building control regulations for any other building or installation, will the right hon. Gentleman ensure that the Department of the Environment introduces the necessary building control regulations for any new central heating or water cooling systems rather than awaiting another disaster such as the one that we have already had in the NHS?

Mr. Hayhoe: The general tenor of the hon. Gentleman's remarks is much less than fair to the very careful preparation that has been done in the past to give guidance on the dangers and difficulties associated with the disease. I checked the experience in other countries, and I found that the guidance that was issued by the NHS in this country was in advance of that issued anywhere else in the world. We should take pride in the fact that NHS staff have been out in the front and leading internationally in dealing with this difficult infection.
With regard to passing on information, the report is going to all health authorities. No doubt, in their own circumstances, they will let all those concerned know. There are recommendations in the report about the wed for further training and, of course, it will be carried through.

Several Hon. Members: rose——

Mr. Speaker: Order. I must have regard to subsequent business on the Order Paper. This statement is about the inquiry into legionnaire's disease in Stafford. Will hon. Members direct their questions to that and not widen the issue?

Mr. Peter Bruinvels: As I have two hospitals in my constituency—Leicester general and the Towers hospital — will my right hon. Friend assure constituents and the elderly——

Mr. Speaker: Order. That is what I was hoping would not happen.

Mr. Bruinvels: Will my right hon. Friend ensure that there is wide circulation of the Badenoch report so that elderly people in the country, including Stafford, realise that when they go into hospital they will be properly cared for and that health and safety will be maintained throughout? Will he further ensure that the report will be distributed not just to the health authorities but to those who are particularly concerned—the elderly?

Mr. Hayhoe: I can assure my hon. Friend that the report will go to all the health authorities, and indeed it has been circulated among Government colleagues and, I am pretty sure, to the professional institutions and others involved. I imagine that within the scientific and engineering community with particular concern for those systems the report's recommendations will be studied with care. The guidance that my Department will issue to all health authorities will also be made available to anyone else outside who has an interest and who asks for it.

Mrs. Gwyneth Dunwoody: Is not the Minister aware that it was precisely because it was impossible to isolate the true origin of the epidemic at Stafford that there was considerable disquiet in the area? Will he please understand that what is required now is urgent action in relation to the other hospitals with comparable systems? That requires central funding. It is not enough to send out a circular. Those hospitals must be given money immediately so that they can do something about their existing systems.

Mr. Hayhoe: The hon. Lady slightly misunderstands the position. Guidance about existing systems has been available since 1980, and it was reinforced in July 1985 and January 1986. The hon. Lady does a grave disservice if she is trying to show that a shortage of finance is connected with the difficulties. If she reads the report, she will see that lack of finance was in no way involved.

Mrs. Ann Clwyd: The Minister has talked about specific recommendations for hospitals, but I suggest that an outbreak could occur in air conditioning systems in other public buildings, unless proper maintenance of the systems is carried out. The remit of any committee that the right hon. Gentleman sets up should include aspects of air pollution through air conditioning systems and its effect on health. More people are recognising the link between air conditioning systems and absenteeism from work, with more infections — [Interruption.] But it is important that any committee——

Mr. Speaker: Order. I am sure that it is important, but will the hon. Lady please concentrate on the statement?

Mrs. Clwyd: I am attempting to do so, Mr. Speaker, by showing that legionnaire's disease could occur in any public building unless there is proper control of air conditioning systems. Any committee that the Minister intends to set up should have a much wider remit than what he has suggested so far.

Mr. Hayhoe: The hon. Lady must have misunderstood what I said. She will understand when she reads the report. Sir John Badenock's committee has produced a first report dealing with the Stafford incident in particular. I said that there would be a second report, which would look at what could be done to reduce any risk from the disease in other circumstances, in hospitals or other buildings, whether in the public or private sector, and elsewhere. Even the possibility of the infection on ships has already been identified. Sir John and his colleagues are going ahead with that wider work and their report can be expected towards the end of the year.

Mr. Greville Janner: Has the Minister considered paragraph 52 of the report? It says that one of the ways in which the dissemination of this disease is known to occur is
via shower heads or spray taps (which are used intermittently, and where the organism may multiply if the water is warm) …
Bearing in mind that the Select Committee on Employment, on which I have the privilege to serve, looked into the problems of this disease and considered evidence to the effect that it also arises from whirlpools and Jacuzzis and in other precise systems where water goes into the air, will the Minister direct the inquiry specifically to those problems? Apparently no prosecutions are to arise from the current disasters. Can the Minister tell the House

whether as a result of this inquiry and the miseries which gave rise to it steps will be taken to remove Crown immunity in respect of any such further incidents which may involve liability by hospitals or prisons or any other public institution? That immunity should have been removed long ago.

Mr. Hayhoe: Crown immunity has absolutely nothing to do with this. If compensation is paid as a result of this inquiry and this incident, it will be a matter for the Mid Staffordshire health authority operating under our regulations, and in the final analysis it will be a matter for the courts to determine. I can give the hon. and learned Member the assurance that Crown immunity will not come into that.
The hon. and learned Gentleman directed my attention to a paragraph in the report and seemed to be suggesting that I should draw Sir John's attention to that paragraph so that he and his colleagues could carry out further work. Sir John and his colleagues hardly need me to draw their attention to what they have written so that they can decide upon their further work. As I have said, that work will be wide ranging and Sir John and his colleagues will look at the action that will be required to reduce the possibility of this infection arising in hospitals, in other buildings or elsewhere. Sir John and his colleagues have taken a fairly wide remit.

Mr. Gareth Wardell: This important report demonstrates the difficulty of explaining why legionnella bacilli multiply. In following up the report, will the Minister ensure that a careful look is taken at the extent to which the problem could arise because of products being used in the manufacture of drainage systems, air cooling towers and so on that do not comply with the BSI standard, especially if such products are imported?

Mr. Hayhoe: I am sure that Sir John and his colleagues will wish to look at that matter.
The hon. and learned Member for Leicester, West (Mr. Janner) spoke about other buildings. I have checked and found that the air conditioning system in the Houses of Parliament does not have a water spray system.

Dr. John Marek: May I refer the Minister to the recommendations of the report and especially to recommendation 8(a) on page 64? It says:
urgent consideration should be given to replacing any wet cooling tower with an air-cooled system".
That will involve finance. Can the Minister say whether finance will be provided and, if so, whether it will come from central funds?

Mr. Hayhoe: The report says that urgent consideration should be given to those matters and as a first step towards giving that consideration we have called for information about the systems in use. That information will need to be considered. As I have said, the immediate priority must be to ensure tha the existing equipment is correctly and safely maintained. Of course it will cost money to replace water spray cooling towers. It is clear that the inquiry did not recommend immediate replacement of such systems, and in any case the replacement of towers that are at the end of their lives will cost money.
In planned hospital building for the future we have, fortunately, turned to air cooling rather than water spray cooling and we will look into the problems identified by the survey that has been initiated about dealing with


existing water spray cooling towers. If that involves significant cost, then, of course, the matter will be looked at. Changing circumstances are always looked at in the context of the ways in which we fund the National Health Service.

Mr. Frank Haynes: On a point of order, Mr. Speaker. Earlier today we had a statement about the resignation of Mr. Victor Paige. I asked the Secretary of State a question. I am not suggesting that his reply was a lie, but I am suggesting that we should have fairness and I know that you, Mr. Speaker, try to ensure that. The Secretary of State said that the Committee which considered the Social Security Bill sat for three months. That is correct, and I never missed a sitting. He said that I suggested things in the Committee with which he totally disagreed. The Secretary of State was hardly ever there. May I suggest that you, Mr. Speaker, have a word with the Secretary of State to sort things out?

Mr. Speaker: I thought that the hon. Gentleman had asked for the Minister's resignation.

Mr. Jeremy Corbyn: On a point of order, Mr. Speaker. We have had an important statement about legionnaire's disease at Stafford hospital, and implications for local health authorities clearly arise from the statement. The Minister has not answered the serious question about how the local authorities are to fund the cost of implementing the recommendations in the report. Can you advise me, Mr. Speaker, by what means we can get a clear answer from the Government about this important matter that is causing many health authorities a great deal of worry?

Mr. Speaker: I called the hon. Gentleman to ask a question, but I do not know whether it was fully answered. There are other ways in which the hon. Gentleman can deal with the matter. He can deal with it at Question Time or even by way of an Adjournment debate if he is fortunate enough to get one.

BILL PRESENTED

TOBACCO PRODUCTS (HEALTH WARNINGS)

Mr. Archy Kirkwood, supported by Mr. Roger Sims and Mr. Laurie Pavitt, presented a Bill to provide for the presentation of health warnings on packaging of tobacco products, and related advertising and promotional materials: And the same was read the First time; and ordered to be read a Second time on Friday 4 July and to be printed. [Bill 170.]

Road Traffic Accidents Compensation for Victims

Mr. Greville Janner: I beg to move,
That leave be given to bring in a Bill to provide compensation for victims of road traffic accidents without proof of fault and for related purposes.
The casualty toll on our roads is horrific, and from figures supplied to me last week in a written answer it appears that in the last four years for which records were available 1,251,000 of our citizens were injured in road accidents. Of those, 682,000 were men, 380,000 were women and 189,000 were children. We know from the researches carried out by the Royal Commission on civil liability and compensation for personal injury, chaired by Lord Pearson, and known as the Pearson commission, that only a fraction of those who are injured on our roads receive any compensation through the ordinary provisions of the law on tort, a law which requires those who seek damages to prove negligence against the defendant. The report said:
only about a quarter of those who are injured by motor vehicles actually succeed in recovering tort compensation".
The manner in which it is decided whether someone who is injured on the road is to get compensation is archaic, ridiculous and does not work. It is a form of legal lottery, or, as the Pearson commission said:
the fault principle operates with particular capriciousness. The `forensic lottery' had become 'a lunatic lottery and an absurd system for providing compensation for anyone."'
The system denies compensation to most people and ensures that in most cases those who obtain compensation are kept waiting for a long time for the money that they so desperately need.
It is the purpose of this Bill to introduce into our law the concept of no-fault liability in respect of road traffic accidents. It would ensure that when a case comes to court years after an accident people are not called upon to give evidence about what happened in a split second. which, even immediately afterwards, they cannot remember with any certainty, that they are not cross-examined in court about matters which occurred when they were suffering from shock, and even if they are trying to tell the truth—most are—will fail to do so, that matters which rely on personal recollection and not upon documentation but upon which people's entire financial futures depend, will not be matters for courts, and that people who are entitled to be compensated will obtain that compensation without having to prove negligence.
The concept is not new in our law. Under the Employers Liability (Defective Equipment) Act 1969, when an employee is injured or killed at work because of defective equipment, and in a subsequent action the employer is deemed to have been negligent, liability is imposed without fault. The House has accepted and approved a directive of the European Economic Community regarding product liability, and the Government are therefore committed to introducing legislation that will bring no-fault liability into our law in respect of defective products. If a product is manufactured in or imported into Britain after the summer of 1988 and it is defective and the defect causes death or personal injury, the sufferer will not have to prove negligence against the defendant — it will be presumed. The Bill would introduce precisely the same concept into the much


larger, broader, more anguished and common area of road traffic accidents, in respect of which 250,000 families are affected each year by the nonsense and lack of sense and compassion of the law as it stands.
Strangely enough, matters are getting steadily worse. In Leicestershire, for example, the number of people killed on the county's roads during the first three months of this year was almost double that for the same period in 1985. Seat belts have done some good, but they have not removed the miseries of the road casualty. The Bill would provide for no-fault liability.
The question that would then arise is, who would pay for the reform? Part of the problem is that a private Member's Bill cannot involve public expenditure, because that is contrary to the rules. Part of the answer lies in the removal from lawyers and courts of cases which could properly be dealt with through a different and much less expensive system. Money would therefore be saved. Part of the answer may lie in the system which exists in New Zealand and which, I am told, is to be introduced in Australia. The state operates a scheme with or without insurance companies. The answer may lie in the insurers bearing the cost, as part of the cost would be saved by their not being forced into litigation, courts and unworthy and unnecessary costs. Part of the cost might be added to insurance premiums. I reckon that most motorists would be pleased to pay that price if it meant that, in the event of an accident, they would stand a chance of getting compensation such as is denied to them at present.
I wish to pay tribute to the memory of Lord Pearson, a man for whom I had enormous affection and respect. I wish that his report in this respect had not been hidden away since 1979–80. At least this Bill will bring to the attention of the House, the Government and the public the fact that the forensic lottery must end. That was the Pearson commission's description of this unduly slow and expensive to administer system. One day, some 45 per cent. of the cost of tort compensation will cease to be swallowed in administration costs and people will get the compensation to which they are entitled.
If the House accepts the Bill, it will add to people's prospects of getting justice. As the Pearson commission said in respect of product liability, there is no justice in our courts for most of our citizens. Those who are poor enough to get legal aid can bring a case to court, those who are rich enough not to need it may sue or defend, but for those who, like most of us, come somewhere in between, there is no hope of fighting a case. That is why some three quarters of accident victims who deserve compensation get none.
In those circumstances, I hope that the House will give me leave to introduce the Bill as the start of a campaign which I trust will end as did the product liability campaign—with a change in the law.

Question put and agreed to.

Bill ordered to be brought in by Mr. Greville Janner, Mr. Stuart Bell, Mr. Gerald Bermingham, Mr. Tony Blair, Mr. Gordon Brown, Mr. Alfred Dubs, Mrs. Gwyneth Dunwoody, Mr. Frank Field, Mr. Ron Leighton and Mr. Geoffrey Robinson.

ROAD TRAFFIC ACCIDENTS COMPENSATION FOR VICTIMS

Mr. Greville Janner accordingly presented a Bill to provide compensation for victims of road traffic accidents without proof of fault and for related purposes: And the same was read the First time; and ordered to be read a Second time upon Friday 4 July and to be printed. [Bill 169.]

Building Societies Bill [Money] (No. 2)

Queens Recommendation having been signified—

Ordered,
That, for the purpose of any Act resulting from the Building Societies Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenses incurred by the Treasury for the purposes of tribunals established in pursuance of that Act to hear appeals against decisions of the Building Societies Commission established by that Act relating to the authorisation of building societies to raise funds and borrow money.—[Mr. Ian Stewart.]

Orders of the Day — Building Societies Bill

As amended (in the Standing Committee), considered.

New Clause 3

POWER TO AMEND, ETC., TO ASSIMILATE TO COMPANY LAW

'(1) If, on any modification of the statutory provisions in force in Great Britain or Northern Ireland relating to companies, it appears to the Treasury to be expedient to modify the relevant provisions of this Act for the purpose of assimilating the law relating to companies and the law relating to building societies, the Treasury may, by order, make such modifications of the relevant provisions of this Act as they think appropriate for that purpose.

(2) The "relevant provisions of this Act" are the following provisions as for the time being in force, that is to say—

(a) so much of Part VI as relates to investigations or inspections;
(b) the provisions of part VII (management);
(c) the provisions of Part VIII (accounts and audit); and
(d) so much of Part IX as relates to winding up.

(3) The power conferred by subsection (1) above includes power to modify the relevant provisions of this Act so as to—

(a) confer power to make orders, regulations, rules or other subordinate legislation;
(b) create criminal offences; or
(c) provide for the charging of fees but not any charge in the nature of taxation.

(4) An order under this section may—

(a) make consequential amendments of or repeals in other provisions of this act; or
(b) make such transitional or saving provisions as appear to the Treasury to he necessary or expendient.

(5) The power to make an order under this section is exercisable by statutory instrument but no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.

(6) In this section—
modification" includes any additions and, as regards modifications of the statutory provisions relating to companies, any modification whether effected by any future act or by an instrument made after the passing of this Act under an Act whenever passed; and
statutory provisions" includes the provisions of any instrument made under an Act.'. — [Mr. Ian Stewart.]

Brought up, and read the First time.

The Economic Secretary to the Treasury (Mr. Ian Stewart): I beg to move, That the clause be read a Second time.
The new clause provides that if in future changes are made to the law relating to companies such as are also appropriate for building societies, comparable provisions can be made by statutory instrument to apply those changes to building societies.
By way of example, I should mention clauses 57 to 60, which deal with loans to directors and cover matters which were enacted for companies in 1980 but which had to wait for several years for primary legislation to extend them to building societies. The power proposed in new clause 3 would enable building societies to be brought into line and to avoid that problem in future.

Mr. Ken Weetch: The Opposition have nothing of substance to argue with in the new clause. If company legislation is amended and the Government want

to amend building society legislation accordingly, the new clause empowers them to do that without too much fuss. We believe that that is quite logical.
As building societies are to have more commercial purposes and as large sections of the Bill are derived or borrowed from company legislation, it seems logical to empower the Treasury to relate new and amended company legislation to building societies without primary legislation.
Only one matter has occurred to the Opposition upon which we would like assurance. In the first place, the legislation would be thoroughly scrutinised by the House if the House wished to take that opportunity. Will the Minister explain why such alterations were contemplated? Under subsection (5), that must be done by affirmative resolution. There will be ample opportunity for scrutiny and questioning about its purpose and relevance. Therefore, the Opposition do not take issue with the Government over the new clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 4

SERVICE OF NOTICES

'.(1) This section has effect in relation to any notice, directions or other document required or authorised by or under any provision of this Act or by the rules of a building society to be served on any person other than the Commission and the central office but subject, in the case of notices or other documents to be given or sent to members of a building society, to any provision of its rules.

(2) Any such document may be served on the person in question—

(a) by delivering it to him;
(b) by leaving it at his proper address; or
(c) by sending it by post to him at that address.

(3) Any such document may—

(a) in the case of a building society, be served on the secretary of the society;
(b) in the case of a body corporate (other than a building society), be served on the secretary or clerk of that body;
(c) in the case of a partnership, be served on any partner;
(d) in the case of an unincorporated association other than a partnership, be served on any member of its governing body.

(4) For the purposes of this section and section 7 of the Interpretation Act 1978 (service of documents) in its application to this section, the proper address of any person is—

(a) in the case of a building society or its secretary, the address of its principal office;
(b) in the case of a member of a building society, his registered address;
(c) in the case of a director or the chief executive of a building society, his officially notified address;
(d) in the case of a body corporate (other than a building society) its secretary or clerk, the address of its registered or principal office in the United Kingdom;
(e) in the case of an unincorporated association (other than a partnership) or a member of its governing body, its principal office in the United Kingdom;

and, in any other case, his last-known address (whether of his residence or of a place where he carries on business or is employed).'.—[Sir George Young.]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for the Environment (Sir George Young): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will he convenient to take Government amendments


Nos. 7, 33, 125, 131, 136, 143, 148, 151 to 153, 157, 159, 164, 179, 180, 187, 210, 215, 217, 218,155, 234, 241,242,255,263 to 267, 275,290, 292,306,333,337, and 341.

Sir George Young: New clause 4 and the Government amendments are a series of relatively unexciting and mainly technical amendments which improve the parts of the Bill which cover communications between a society and its members, and a society and the commission and the central office.

Mr. Weetch: If ever a true word were spoken, it is that this batch of amendments is totally unexciting. Having examined each amendment separately, there were times when I just had to hold on. I can underline what the Minister has said.
In politics nothing is quite what it seems. We are discussing a great batch of amendments, starting with new clause 4. We believe that the Bill contains certain matters of principle and the remainder is administrative superstructure. While we accept that the superstructure must be correct—and that is important—we intend as a matter of tactics and strategy to confine our main lines of argument to what is controversial, not to these administrative matters which form part of the superstructure of the Bill.
The amendments largely cover technical matters, but we must be assured that the procedures are logical, watertight and, if challenged, accord with principles of natural justice. We have examined all the amendments and are satisfied that these steps meet the criteria needed. Provided that the Government are satisfied that they meet the needs of potential problems that might arise, we give the amendments our approval. With that, the Opposition will not challenge the clause or the amendments.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 6

POWER TO MAKE ADVANCES SECURED ON LAND OVERSEAS

'. — (1) The appropriate authority may, with a view to conferring on building societies or building societies of particular descriptions powers to make advances to members secured on land outside the United Kingdom corresponding to the powers to make advances secured on land within the United Kingdom, by order—

(a) designate countries or territories outside the United Kingdom as countries or territories as respects which advances under this section may be made secured on the land;
(b) specify, or provide for the specification by direction of the Commission under the order of the forms of security on land which may be taken for advances under this section, in any prescribed circumstances and subject to any prescribed conditions;
(c) determine, or provide for the determination under the order of, the classification of the advances (and accordingly of the mortgage debts) as class 1 advances or class 2 advances for the purposes of the requirements of this Part for the structure of commercial assets;
(d) provide for the application of the provisions of this Part applicable to advances secured on land to advances under this section with such modifications as appear to be appropriate;

(e) provide for any other provisions of this Act to have effect in relation to advances under this section with such modifications as appear to be appropriate; and
(f) make such incidental, supplemental or transitional provision as appears to be necessary or expedient.

(2) Any powers conferred on building societies under this section may be conferred on building societies of a specified description or all building societies other than those of a specified description.

(3) Where, by virtue of an order under subsection (1) above, advances are made by a building society on the security of land outside the United Kingdom, the aggregate amount of mortgage debts outstanding in respect of such of those advances as are class 2 advances under the order shall count in accordance with section 18 towards the limit applicable to class 2 assets under that section.

(4) Subsection (3) above is subject to any provision contained in the order.

(5) The "appropriate authority" for making an order under subsection (1) above is—

(a) as regards the relevant British overseas territories, the Commission acting with the consent of the Treasury, and
(b) as regards other countries or territories, the Treasury.

(6) The power to make an order under subsection (1) above is exercisable by statutory instrument and, as regards the procedure applicable to such an order,—

(a) if the instrument designates other countries or territories than any of the relevant British overseas territories, the order shall not be made unless a draft of it has been laid before and approved by resolution of each House of Parliament, and
(b) if the instrument designates any relevant British overseas territory and no other country or territory, the instrument shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(7) In this section—
relevant British overseas territories" means the Channel Islands, the Isle of Man and Gibraltar;
security on land" includes any right or power in or over land to secure the payment of a debt and "secured on land" has a corresponding meaning;
specified" means specified in an order under subsection (1) above;

and any reference to a provision of this Part is a reference to that provision as applied to advances under this section. — [Sir George Young.]

Brought up, and read the First time.

Sir George Young: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to take the following: Government new clause 7 — Qualifying asset holding for certain powers.
Government new clause 23—Loans for mobile homes (No. 2).
Government amendments Nos. 6, 56, 58 to 60, 62 to 64, 240, 243 and 246.

Sir George Young: In fairness to the amendments that we have just dealt with, I said not that they were "totally unexciting", but that they were "relatively unexciting". The totally unexciting amendments will be dealt with in a moment.
New clause 6 honours a commitment that my hon. Friend gave in Committee. New clauses 7 and 23 deal with mobile homes. The Government believe that it is important to provide more help for the mobile home sector. These days, mobile homes are a far cry from the caravans whose image they share. Mobile homes are prefabricated units built to a high specification conforming to BSI requirements and they have a life of at least 25 years. The fittings are of a high quality and all main services are laid on. They are mobile in the sense that they can be dismantled and moved to a new site.
It is appropriate that building societies should be given greater powers to lend on security of a mobile home than other class 2 lending powers. After considering the position, the Government have decided to make an exception on mobile homes to the £5,000 limit on class 3 loans to individuals. Societies with a qualifying assets holding will be able to lend up to £10,000 on the security of a mobile home.

Mr. John Heddle (Mid-Staffordshire): I should like to introduce my brief remarks by declaring an interest. I have the honour and privilege to he a vice-president of the Building Societies Association.
I support the remarks made by my hon. Friend the Under-Secretary of State for the Environment. I am sure that one way in which building societies can help is to lend money at realistic and responsible rates of interest to people who want to exercise their right to buy but who, through dint of circumstance, are unable to do so through normal and traditional methods. The only way these people can achieve that is to acquire a mobile home.
My hon. Friend the Under-Secretary of State introduced legislation which brought security of tenure to those who had previously found that, although they owned a home, they did not own the land on which their home was situated. The Government have secured for them the right to ownership through the Mobile Homes Act 1983. Building societies have a responsibility to ensure that these vulnerable people who own and occupy mobile homes on mobile parks are protected. Hon. Members on both sides of the House who have mobile home parks in their constituencies know that these people do not consider themselves as owner-occupiers or council tenants in the first place. They consider themselves to be home owners in the last resort. Such people could fall prey to consumer credit organisations which charge rates of interest far in excess of those charged by responsible and prudent building societies.
I commend the new clause. I issue a challenge to building societies to allocate significant funds to extend to a large section of the mobile home community the opportunity to exercise the right to buy and the right to home ownership.

Mr. Eric Cockeram: I declare an interest as the parliamentary adviser to the Midshires Building Society.
New clause 6, when exercised, will give building societies the power to lend on property overseas. Does my hon. Friend the Under-Secretary of State intend to ensure that building societies will be given early powers to lend on land in Great Britain, for example, in the Channel Islands and on the Isle of Man?
It is an anomaly that building societies are not able to lend on the security of land in these islands. Other financial institutions in the United Kingdom with which building societies compete—the banks and the trustee savings banks, for which my hon. Friend the Economic Secretary to the Treasury has responsibility—are able to do business on the Isle of Man and in the Channel Islands. Will my hon. Friend the Economic Secretary ensure that building societies are given powers to carry out business in those territories, even though the House understands that there are many overseas territories in which he would not wish to authorise building societies to act as that might be detrimental to the interests of lenders?

Mr. Gordon Oakes: I do not wish to anticipate what the Minister might say, but I believe that the points that have been raised in relation to the Channel Islands and Gibraltar have been dealt with satisfactorily by the Government in other new clauses.
I also declare an interest, although this is not a financial interest. I am also a vice-president of the Building Societies Association for which I am not paid. That is a great honour.
The hon. Member for Mid-Staffordshire (Mr. Heddle) raised the important matter of mobile homes. Increasing numbers of people live in very satisfactory accommodation in mobile homes. There is no reason why building societies should not advance money on a mobile home provided that it is a permanent home on a mobile home site and not a touring caravan or something of the kind that we have read about recently in the newspapers. This is particularly important because nowadays one marriage in three ends in separation or divorce, resulting in great economic difficulties. It is all very well in Hollywood or on the screen among very rich families, but most ordinary families in this country cannot afford divorce and the cost of supporting an ex-wife as well as a current one. Often the husband or the wife—usually the husband—gives or is forced to give the matrimonial home to the spouse and family and would himself be homeless if he could not occupy a mobile home.
It is extremely sensible to provide that building societies may lend on mobile homes, and the Building Societies Association entirely agrees with what the Government are doing, but the association has just one query about the wording of the new clause. It seems not to deal with joint loans in relation to mobile homes. The association believes that the Bill should provide that a joint loan to two or more persons should be treated as though it were a loan to one of those persons for the purposes of the relevant limits. As this will not be a class 1 loan, the overall limit for class 2 or class 3 loans could be affected. Perhaps the Government could make it clear susequently, either here or in another place, that a joint loan will be treated as one loan.

Mr. Weetch: We are going through the Bill at exhilarating speed, but the Government's luck cannot last. Nevertheless, the Opposition support the new clauses and the amendments.
It was pointed out in Committee that it made more sense for building societies to lend directly overseas rather than through a clutter of subsidiaries, but one or two questions arise in relation to the new clause. I appreciate the distinction between the negative resolution procedure in relation to designated British overseas territories and the affirmative resolution procedure in relation to other overseas territories. These presumably correspond to the possible degrees of risk on categories of secured investments, the firmer security of the affirmative procedure being required as a check by the House.
Subsection (5)(a) of new clause 6 provides for the commission to act with the consent of the Treasury, but under subsection (5)(b) the Treasury will act on its own. Perhaps the Minister will explain why in one case the Treasury will advise the commission whereas in the other the Treasury will act alone.
In new clause 7 it makes a great deal of sense to separate the two principles originally contained within the framework of clause 14.
By and large, all these provisions make a great deal of sense, and the provisions with regard to mobile homes are to be welcomed. I shall therefore say no more on that subject as I am most encouraged by all that has been said already.

Sir George Young: A number of points have been raised in this short debate. I can assure my hon. Friend the Member for Ludlow (Mr. Cockeram) that it is indeed our intention to lay orders at an early stage providing the relevant powers in relation to relevant overseas territories.
The right hon. Member for Halton (Mr. Oakes) made a fair point about joint loans. The Government will look again at the point and if we are convinced of the logic of the case we shall take appropriate steps in another place.
With regard to new clause 6, the Government agreed in Committee to consider an order-making power to allow societies to act directly overseas rather than through subsidiaries, thus allowing flexibility to reconsider arrangements for overseas operations if circumstances—for example, in the EEC—should change. Although the provisions in the Bill already go beyond what is available in most other states and are entirely consistent with our treaty obligations and with the draft directive, the Government have looked at the matter again and in the interests of flexibility we have decided to include an order-making power for direct operations.
On the rather technical question about the Treasury acting on its own volition or giving advice, I should like to reflect on what the right hon. Gentleman has said and write to him or see that his representative in another place gives him the answer.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 7

QUALIFYING ASSET HOLDING FOR CERTAIN POWERS

' .—(1) This section has effect for determining for the purposes of this Act whether, in any financial year, a building society has a "qualifying asset holding".

(2) A building society has a qualifying asset holding in any financial year if, and only if, the aggregate value of its total commercial assets, as shown in its annual accounts for the previous year, is not less than £100 million or such other amount as may be substituted for it under subsection (3) below.

(3) The Commission, with the consent of the Treasury, may by order made by statutory instrument substitute for the amount for the time being specified in subsection (2) above such other amount as the Commission considers appropriate.

(4) An order under subsection (3) above may contain such transitional provisions as the Commission considers necessary or expedient.

(5) An instrument containing an order under subsection (3) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.'. — [Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 8

OFFICERS AND AUDITORS NOT TO BE EXEMPTED FROM LIABILITY

' .—(1) Subject to subsection (3) below, any provision to which this section applies, whether contained in the rules of a building society or in any contract with a building society or otherwise, shall be void.

(2) This section applies to any provision for—


(a) exempting any director, other officer or person employed as auditor of a building society from any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, breach of duty or breach of trust of which he may be guilty in relation to the society, or
(b) indemnifying any such person against any such liability.

(3) Subsection (1) above shall not prevent a building society from indemnifying a person against any liability incurred by him in defending any proceedings (whether criminal or civil) in which judgment is given in his favour or in which he is acquitted.

(4) Section 727 of the Companies Act 1985 or, as the case may be, section 394 of the Companies Act (Northern Ireland) 1960 (which empower the court to grant relief in certain cases of negligence, default, breach of duty or breach of trust) shall apply in relation to officers and auditors of a building society as it applies in relation to officers and auditors of a company.'.—[Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
The purpose of imposing obligations on individuals is nullified if the society of which they are directors or by which they are employed is unable to undertake to pay any damages or fine due from it in the event of non-compliance with any obligation. The provisions of section 92 of the Building Societies Act 1962 therefore remain appropriate and the new clause re-enacts them.

Mr. Weetch: This is a straightforward matter, merely repeating the safeguards contained in the 1962 Act. Perhaps the Economic Secretary will refresh my memory. Has this provision been separated from another part of the Bill which came before the Standing Committee, or was it an omission that is now being rectified?

Mr. Ian Stewart: When the new clause was brought to me for approval I asked exactly the same question. The provision was not included in the original arrangements. As the hon. Gentleman knows, many of the provisions of the Bill differ from those of the 1962 Act and it was not fully evident until the Bill was in being that it was still appropriate to include this provision. That is why the new clause has been put forward.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 9

RIGHTS OF APPEAL

`.—(1) A building society which is aggrieved by a decision of the Commission—

(a) to refuse to grant authorisation,
(b) to revoke authorisation, or
(c) to impose conditions or as to the conditions imposed, may appeal against the decision to a tribunal constituted in accordance with section (Determination of appeals).

(2) Any person in relation to whom the Commission, in deciding to refuse to grant or to revoke authorisation or to impose conditions, makes a determination that a person is not a fit and proper person to hold, or as the case may be, to remain in an office in the society or imposes a requirement that he be removed from an office in the society, may appeal against the decision so far as it relates to that determination or requirement.

(3) The revocation of a society's authorisation shall not have effect until—

(a) the end of the period within which an appeal can be brought against the Commission's decision to revoke it; and
(b) if such an appeal is brought, until it is determined or withdrawn.

(4) Subsection (3) above applies in relation to the expiry of a society's authorisation on a refusal to grant authorisation under section 39 as it applies to the revocation of a society's authorisation.

(5) Subject to any order of the tribunal made under section (Determination of appeals) (5), an appeal under subsection (1)(c) or (2) above shall not affect the operation, pending the determination of the appeal, of any condition which is the subject of the appeal; and no determination of an appeal by any person, under subsection (2) above shall affect the revocation for the purposes of which the Commission made its determination or requirement in relation to that person.

(6) In this section and section (Determination of appeals)—
conditions" means conditions to be complied with by a building society and imposed on the grant of authorisation under section 9, on the renewal of authorisation under section 39, on reauthorisation under section 42, or under section 40;
grant" includes renew; and
revoke" means revoke under section 41(1).'.—[Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 10 — Determination of appeals,
Government new clause 12 — Further appeals on points of law,
Government amendments Nos. 24, 32, 135, 139, 235 and 293 to 300.

5 pm

Mr. Stewart: The new clause and the amendments deal with the system of appeals. The clauses provide for a new system whereby building societies may appeal to an independent tribunal against decisions of the commission regarding matters of authorisation. Under existing legislation, the chief registrar's use of discretionary powers on prudential matters is subject to Treasury consent and, ultimately, of course, to judicial review in court.
Under the new building society regime, we have concluded that- societies should have available a formal system of appeal which is designed to take account of the new system of authorisation to be established by the Bill and which can be brought into operation as rapidly as possible in cases of dispute. The clauses have been discussed extensively with interested parties, and particularly with the Building Societies Association, which has welcomed their inclusion. I hope that they will also be welcomed by the House.

Mr. Weetch: The commission that was set up earlier in the Bill will have considerable powers. It is right that there should be comprehensive rights of appeal. The Opposition accept that fully in principle. We have scrutinised the new clauses and the amendments. The clauses cover rights of appeal, the determination of appeals, costs and related conditions, and appeals on points of law. They appear to be comprehensive, which we welcome.
I have one question on the detailed text of new clause 9. Similar points arise later on other new clauses and on some of the amendments. The imposition of conditions, as well as the impositions themselves in terms of the subject matter, is now to be subject to appeal. An appeal

may be mounted on both aspects—the principle as to whether conditions will be imposed and the factual content of the conditions themselves.
As I understand it, a building society can appeal against the principle of conditions being imposed and against the subject matter of the conditions. In new clause 10(6)(c), the tribunal will have power to direct the commission to determine conditions. Therefore, do I understand correctly that if a building society loses the day on the imposition of conditions, the tribunal can say what the conditions are to be? Subsequently, could another appeal be mounted against the factual contents of the conditions that were declared as a result of the request of the tribunal ?

Mr. Ian Stewart: The hon. Gentleman has rightly drawn attention to the technical operation of the provisions. We decided that appeal should be available across the range of decisions which the commission can make, that is to say, not only on the granting or on the revoking of authorisation but on the imposition of conditions. The hon. Gentleman has put his finger on a difficulty; a society can appeal against conditions absolutely but it can also appeal against the conditions themselves.
If the commission is clear that the society should be able to continue with authorisation only provided that conditions are attached, an appeal against any conditions being applied would in effect be a challenge to the commission on its assessment of the position. The commission might well respond by suggesting revocation. It is more likely in practice that the appeal will be on the nature of the conditions rather than on the imposition of conditions. That means that it is more likely to be a single exercise of the appeal procedure than a to-ing and fro-ing. I shall read later what the hon. Gentleman has said and if I have anything to add I shall write to him.
The matter was considered for its practical implications during the consultation period. I am advised that the points which the hon. Gentleman has raised have been dealt with in the proposed system and that that system is the one most likely to operate cleanly and quickly. One of the most important requirements for any appeal procedure in relation to a society is to deal with the appeal with as little fuss and bother as possible so that the affairs of the society are not held up to public view and its dirty linen is not washed in public, which might cause anxiety to members and depositors and therefore damage the credibility of the society in the market. We want to avoid that. Therefore, we want as direct and rapid a system as possible. We think that we have achieved it. That is what the amendments are designed to do.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 10

DETERMINATION OF APPEALS

`.—(1) Where an appeal is brought under section (rights of appeal) a tribunal to determine the appeal shall be constituted in accordance with subsection (2) below.

(2) The tribunal shall consist of—

(a) a chairman appointed by the Lord Chancellor or the Lord Advocate, and
(b) two other members appointed by the Chancellor of the Exchequer.

(3) The chairman shall be a barrister, solicitor or advocate of at least seven years standing; and the other two members shall


be persons appearing to the Chancellor of the Exchequer to have respectively experience of accountancy and experience of the business of building societies or of other financial institutions.

(4) On any appeal against any decision of the Commission the question for the determination of the tribunal shall be whether, for the reasons adduced by the appellant, the decision was unlawful or not justified by the evidence on which it was based.

(5) The tribunal may, on the application of the building society concerned, order that the operation of any condition which is the subject of an appeal by the society be suspended pending the determination of the appeal.

(6) The tribunal may confirm or reverse the decision which is the subject of the appeal but shall not have power to vary it except by directing the Commission—

(a) in the case of an appeal against a decision to refuse to grant authorisation, to determine the conditions to which the grant of authorisation is to be subject;
(b) in the case of an appeal against a decision to revoke authorisation, to determine the conditions or different conditions subject to which the authorisation is to continue in force, as the case may be;
(c) in the case of an appeal against the imposition of conditions or as to the conditions imposed by the decision, to determine the conditions or different conditions subject to which the authorisation is to be granted or is to continue, as the case may be.

(7) Where by virtue of subsection (6) above the tribunal directs the Commission to determine conditions or different conditions, the Commission shall by notice to the society concerned impose such conditions to be complied with by the Society as it considers expedient in order to protect the investments of shareholders or depositors and—

(a) Part III of Schedule 3 to this Act shall apply subject to the modifications made by paragraph 11 of that Schedule; but
(b) the society concerned may appeal to the tribunal against any of those conditions;

and on any such appeal the tribunal may confirm or reverse the Commission's decision with respect to the conditions which are the subject of the appeal or may direct the Commission to determine different conditions.

(8) Where by virtue of subsection (7) above the tribunal, on an appeal against any conditions, directs the Commission to determine different conditions, the other provisions of that subsection shall apply as they apply where the tribunal gives such a direction by virtue of subsection (6) above.

(9) Where the tribunal reverses a decision of the Commission to refuse to grant authorisation, it shall direct the Commission to grant it; and where the tribunal reverses a decision of the Commission to make the grant of authorisation subject to conditions, it shall direct the Commission to grant it unconditionally.

(10) Notice of a tribunal's determination, together with a statement of its reasons, shall be given to the appellant and to the Commission; and unless the tribunal has directed the Commission to determine conditions or, in any other case, the tribunal directs otherwise, the determination shall come into operation when the notice is given to the appellant.

(11) The Treasury may out of money provided by Parliament pay to the persons appointed as members of a tribunal under this section such fees and allowances in respect of expenses as the Treasury may determine and any other expenses incurred for the purposes of this section.'—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 12

FURTHER APPEALS ON POINTS OF LAW

'. — (1) An appeal shall lie to the High Court at the instance of the building society concerned or of the Commission on any question of law arising from any decision of a tribunal uner section (Determination of appeals); and if the court is of the opinion that the decision was erroneous in law, it shall remit the matter to the tribunal for re-hearing and determination by it.

(2) In the application of this section to a building society whose principal office is in Scotland, references to the High Court shall be construed as references to the Court of Session.

(3) No appeal to the Court of Appeal or to the Court of Appeal in Northern Ireland shall be brought from a decision under subsection (1) above except with the leave of that court or of the court or judge from whose decision the appeal is brought.

(4) An appeal shall lie, with the leave of the Court of Session or the House of Lords, from any decision of the Court of Session under this section, and such leave may be given on such terms as to costs, expenses or otherwise as the Court of Session or the House of Lords may determine.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 13

SCHEMES FOR THE INVESTIGATION OF COMPLAINTS

' . — (1) An individual shall, by virtue of and in accordance with schemes under this section. have the right, as against a building society, to have any complaint of his about action taken by the society in relation to a prescribed matter of complaint which affects him in prescribed respects investigated under the scheme.

(2) An individual shall also, by virtue of and in accordance with schemes under this section, have the right, as against any body which is associated with a building society, to have any complaint of his about action taken by that body in relation to a prescribed matter of complaint which affects him in prescribed respects investigated under the scheme.

(3) Every authorised building society shall be a member (and it may be the sole member) of one or more recognised schemes which or which between them confer the rights required to be conferred by subsection (1) above in relation to every matter (within its powers) which is for the time being a prescribed matter of complaint.

(4) The obligation imposed by subsection (3) above, in so far as it relates to a prescribed matter of complaint arising out of the exercise of adoptable powers, is to be construed as requiring a society to be a member of a recognised scheme conferring rights in relation to that matter not later than the date at which the alteration of the society's power takes effect.

(5) Every authorised building society shall secure that each of the bodies associated with it is a member of one or more recognised schemes which or which between them confer the rights required to be conferred by subsection (2) above in relation to every matter (within the powers of that body) which is for the time being a prescribed matter of complaint.

(6) Schedule (schemes for investigation of complaints) to this Act has effect for the purposes of this section and, in that Schedule—

(a) Part I prescribes the matters for which provision must be made by a scheme if it is to be a scheme which qualifies for recognition for the purposes of this section;
(b) Part II prescribes the matters action in relation to any of which must be subject to investigation under a scheme if it is to qualify for recognition for the purpose of investigations in relation to that matter; and
(a) Part III contains other requirements to which a scheme must conform if it is to be so recognised.

(7) The Commission, with the consent of the Treasury, may by order vary Part II or Part III of Schedule (Schemes for investigation of complaints) by adding to or deleting from it any provision or by varying any provision for the time being contained in it; and an order under this subsection may make such transitional provision as appears to the Commission to be necessary or expedient.

(8) The Commission shall have the function, in accordance with Schedule (Schemes for investigation of complaints; recognition, accession etc.) of granting recognition of schemes and of withdrawing any recognition it has granted; but recognition does not extend to, and if not required for, provisions in a scheme which are not required to be made in pursuance of Schedule (Schemes for investigation of complaints) to this Act.

(9) The Commission shall have power to do anything which is calculated to facilitate the discharge of its functions under subsection (8) above, or is incidental or conducive to their discharge, but this does not extend to expenditure for the purpose of operating a scheme.

(10) For the purpose of complying with the duty imposed on it by subsection (3) above, a building society may—

(a) make, or join with other building societies or other bodies in making, a scheme or schemes to be submitted to the Commission for approval by it as a recognised scheme; or
(b) accede as a member to any scheme, whether a scheme it has made or joined in making or a scheme made by other building societies or other bodies, which is for the time being a recognised scheme.

(11) A building society may also make or join in making, or accede to, schemes which are not required for the purposes of this section.

(12) The central office shall have the function, in accordance with Schedule (Schemes for investigation of complaints: recognition, accession, etc.) of recording accessions to schemes and of confirming any withdrawal from a scheme.

(13) A building society may withdraw from membership of a scheme but, if the scheme is a recognised scheme, its withdrawal is not effective except in accordance with the applicable provisions of Schedule (Schemes for investigations of complaints: recognition, accession, etc.).

(14) The power to make an order under subsection (7) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(15) In this section, section (Investigation of complaints: supplementary provisions), Schedule (Schemes for investigation of complaints) and Schedule (Schemes for investigations of complaints: recognition, accession, etc.)—
accede", in relation to a scheme, means assume the obligations and rights of membership and "accession" has a corresponding meaning;
action" includes any failure to act, and so as regards "exercise" in relation to any power; and "action", in relation to a society, includes action on its behalf by any body associated with it;
prescribed", in relation to matters of complaint, means prescribed for the time being in Part II of Schedule (Schemes for investigation of complaints) and, in relation to the respects in which a complainant is affected by any action, means prescribed for the time being in Part III of that Schedule as grounds for making action subject to investigation under the scheme; and
recognition" means recognition of a scheme by the Commission for the purposes of this section.'.—[Sir George Young.]

Brought up, and read the First time.

Sir George Young: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to take the following:
Government new clause 14 — Investigation of complaints: supplementary provisions.
Government new clause 15—Settlement of disputes.
Government amendments Nos. 4, 5, 251 to 253, 261 and 291.

Sir George Young: This is an important new clause which imposes an obligation on societies to belong to an ombudsman scheme in relation to certain of their activities and to enable the commission to recognise schemes for that purpose. The provisions give effect to an undertaking that we gave in Committee to oblige building societies to

belong to an approved ombudsman scheme. While voluntary ombudsman arrangements have become more widespread in recent years, and while the Building Societies Association had been planning a scheme for building societies, this is the first compulsory scheme outside the public service.
Before coming to the provisions, I want to pay a tribute to my hon. Friends the Members for York (Mr. Gregory) and High Peak (Mr. Hawkins) for the energy and diligence with which they argued the case for a statutory ombudsman. The introduction of the new clauses is due in no small measure to their efforts.
New clause 13 contains the obligation for societies to belong to a scheme in respect of the relevant activities and provides for recognition of schemes by the commission. It also gives effect to a new schedule which sets out the criteria that a scheme must satisfy if it is to obtain recognition. Firstly, the scheme must cover some or all of the activities on which there must be recourses to an ombudsman: broadly speaking, savings accounts, whether shares or deposits, services relating to the handling of money and all lending, whether classes 1, 2 or 3.
Secondly, the schedule sets out the powers wind' the ombudsman must have to investigate complaints. It makes it clear, however, that his writ does not run to questions purely about a society's commercial judgment about the creditworthiness of a customer, for example, in deciding whether or not to make an advance or to make available a cheque guarantee card or other facilities. It is a fundamental point of principle to the prudent operation of its business that a building society must ultimately reserve the right to make such decisions without the possibility of their being overturned by an outsider. Where there has been maladministration, the ombudsman will be able to ask the society to take the decision again but he will not be able to take the decision for the society.
Thirdly, the schedule deals with the powers of the ombudsman to offer redress to complainants. He may require a society to take steps to remedy its actions or to pay compensation up to a maximum of £100,000, as in the voluntary insurance ombudsman scheme. The scheme need not oblige societies to comply, so long as their reasons are spelt out in the annual directors' report and made public in a way laid down by the ombudsman. That is to avoid derogation by statute from the normal rights of a building society before the courts. However, it would be open to the societies voluntarily to join a scheme which offered no such let-out.
New clause 14 deals with some supplementary points. It sets out the criteria which the ombudsman must use in determining complaints; provides for his decision to be final if accepted by the complainant, although the society may always seek leave to appeal to the High Court on a point of law arising from his decision; and provides a penalty for non-compliance with the statutory obligation to belong to a scheme.
The related new schedule sets out the procedure for recognition of schemes by the commission and for the registry to record their membership. The statutory obligations will be enforced primarily by the criminal penalty for non-compliance, but, as a last resort, the commission may assist in the establishment of a scheme.
Those provisions mark a major step forward in the protection of consumers and will help to ensure that


building societies continue to observe the high standards in dealing with their customers for which they are justly renowned. I commend them to the House.
Amendment No. 253 gives effect to arrangements for the reference of disputes to an arbitrator of the High Court or the commission. They replace part IV of schedule 2 and, if required, I can give a more detailed explanation.

Mr. Oakes: I congratulate the Government on carrying out the express wish of both sides of the Committee. I agree that two Conservative Members suggested establishing an ombudsman for building societies, and that was fully supported by the Opposition.
I have one minor query. Some societies are uneasy about new clause 14 and about paragraph 4 of the new schedule listed as amendment No. 251. At first sight it seems that the adjudicator can override contractual agreements between a building society and a complainant. That may well be right in some cases, especially exceptional ones where the society had clearly acted unreasonably, but the clauses seem to be far more complex than ever we imagined they would be in Committee. We imagined the establishment of an ombudsman to be a simple matter. The clauses are legalistic and complex. This may be necessary — I am not complaining—but they seem to be long winded.
Societies believe that an adjudicator should intervene if a building society's act is overridingly and clearly unreasonable. However, it is hoped that the ombudsman will not use his powers under the schedule to intervene in minor matters where there is a clear contractual agreement between a complainant and a building society.

Mr. Cockeram: I support the Government's new clauses. I heard my hon. Friend the Minister say that this is the first compulsory scheme outside the public sector, and I deplore the fact that he had to make that statement. I am not criticising him, but I am criticising the Building Societies Association, the banks, the insurance companies and a host of other industries concerned with consumers. The furniture industry, for example, has set up a complaints procedure under the Office of Fair Trading. I deeply regret the fact that the building societies have had to be forced into a statutory scheme.
As the right hon. Member for Halton (Mr. Oakes) said, the clauses are much more legalistic and lengthy than we expected when we tabled the amendments in Committee, requiring the establishment of an ombudsman for consumer complaints. I regret and deplore the fact that the scheme is so rigid and inflexible, and I hope that other industries in the financial sector and elsewhere which deal with consumers will learn a lesson from this, namely, that it is much better for them to set up their own scheme than to have one imposed upon them.

Mr. Oakes: As a vice-president of the Building Societies Association, I must say that the building societies in no way oppose the estabishment of an ombudsman. For years the association knew that there was to be a Building Societies Bill. The Government wisely listened to the points made in Committee and inserted this clause in the Bill. It has not been forced on the Building Societies Association. The association happily acquiesces in it.

Mr. Cockeram: I do not dispute that the building societies accept this need. My point is that other industries, including those in the financial sector, have recognised both the need for an ombudsman and the pressure from consumers for an independent adjudicator to whom they can take complaints, and have set up their own ombudsman scheme. It would have been better if the BSA had recognised that pressure and done something similar, thereby avoiding this long and inflexible scheme, which is not in the interests of consumers to the extent that it could have been had the building societies set up their own scheme at the outset.
I congratulate the Minister on having acted in this way, following pressure in Committee.

Mr. Austin Mitchell: I echo the remarks of my right hon. Friend the Member for Halton (Mr. Oakes) and the hon. Member for Ludlow (Mr. Cockeram) in welcoming the new clause. The proposal had all-party support in Committee, which may be why the Government agreed to take it up, although it may be that we had an unusually relaxed and friendly Committee. I pay tribute to the Government for being so accommodating.
The new clause puts into law an important principle, and I accept my right hon. Friend's point that it is not being forced on the building societies, but that they welcome it. It has been inserted in the Bill because this is the most convenient way of providing for an ombudsman. The Government listened to the arguments and seized this opportunity. The building societies are pioneering a development which should be universal and have enforceable provisions. It should exist for the whole of the banking sector more strongly and effectively than it does, for financial institutions, for insurance companies and, indeed, for newspapers. I know that the Daily Mirror has its ombudsman, probably in Liechtenstein, or somewhere equally convenient, for adjudication purposes. I should like this development to spread over a wide range of industries.
Some suspicions have been voiced, especially by solicitors, who are afraid of building societies doing conveyancing, but we shall come to that later. They attempt to give the impression that building societies are huge domineering monopolistic organisations of which people should be afraid. That is not their nature. I do not expect an overwhelming rush of complaints. It is right that building societies should show themselves whiter than white by acceding to the scheme, and I hope that they will accede to a compulsory, binding scheme, not one that allows them to dismiss adjudications in their annual report. It should not be like the local government scheme, which enables local government to reject the ombudsman's recommendations too easily.
Consumers need some help and protection. They need a body to identify with and an agency which will protect them with clear, simple, straightforward procedures so that they have confidence to operate in a system which is often intimidating and frightening.

Mr. Weetch: On behalf of the Opposition, I warmly welcome the principle of an ombudsman for building societies. From experience. I know that disputes between building societies and their members have caused much dissatisfaction. I have been involved in several disputes on a constituency basis, and I have followed some others


through the newspapers. Some celebrated disputes with building society boards of management reached the press some years ago and obtained publicity. To put it no higher, there was a feeling among some ordinary members of building societies that when a dispute occurred and had to be adjudicated upon, the cards were stacked against the ordinary membership. That being so, it was high time that there was an alteration.
I shall keep my remarks about the clauses to a minimum because most of the substantial issues have been discussed. The fact that we have a scheme will give much confidence to the public and will probably underline the increased confidence which investors and members have in building societies. I am pleased that the promise given to the Standing Committee by the Economic Secretary to the Treasury to set up a scheme was fulfilled. He should be personally commended on it. In principle, it covers almost everything; indeed, perhaps it covers too much and a little more should have been left to discretion. However, one can never get these matters right. The scheme covers the fact that an individual has a right to make a complaint on stipulated matters and that a building society must be a member of an approved scheme.
The Government have said that a scheme must be compulsory. They lay down basic principles that must be followed and leave the building society movement to construct a scheme. That is as good a way forward as any.
The ombudsman principle is well founded in public life. It is a success. There are good precedents in the insurance industry and in banks, and it is a sound way of adjudicating in disputes. I underline the fact that, although the clause was the responsibility of the hon. Member for York (Mr. Gregory), it had substantial all-party support. The hon. Member for High Peak (Mr. Hawkins) was also involved. Such all-party support is the clause's political strength. It has been put firmly on the political map, which is a good thing.
The provisions for an ombudsman to adjudicate in disputes are lengthy, detailed and complicated. Could we not have set up a scheme which occupied less print? In the brief which it sent to hon. Members who were interested in arguing the Bill, the Building Societies Association said that the amount of print is such that it may create some awkward legal precedents. Is that the case? What legal scrutiny has it received? Will there be more scrutiny when it reaches the other place so that any rough bits can be made smooth?
Although I make those comments, I do not wish to detract from anything that I said at the beginning of my speech. The House welcomes this considerable step forward for the building society movement.

Sir George Young: I am grateful for the kind words from hon. Members on both sides of the House about the new clause and the Government's initiative to set up an ombudsman scheme. I shall deal briefly with the points that were raised.
On the complexity and length of the schedule, no one is more anxious to keep down the volume of print than my hon. Friend the Economic Secretary and myself, but the complexity is an inevitable result of trying to codify in statute what is a voluntary arrangement. Once the decision is taken to specify that in statute, it becomes unfortunately necessary to do so in some detail, given the criminal sanctions against non-compliance.
The right hon. Member for Halton (Mr. Oakes) was worried about the adjudicator overriding the contractual arrangements between the society and the complainant. Clause 14(4) is the let-out clause that I mentioned in my opening remarks. The adjudicator's finding is legally binding if accepted by the complainant, but is subject to the let-out in subsection (4) whereby the society is not obliged to accept the findings so long as it gives the reasons for so doing in the way specified in the new clause and the amendments. We felt obliged to include the let-out clause by which a society may decide not to comply with the ombudsman's decision as long as it explains its reasons publicly, because we did not want to remove the legal rights of a society before the courts.
The hon. Member for Great Grimsby (Mr. Mitchell) expressed the hope, with which I agree, that the occasions on which a society would take advantage of the let-out clause would be exceptional. Nothing in the provisions would prevent a society from voluntarily giving up the let-out clause. But there is a point of principle. In requiring societies to belong to a scheme under which they must accept the directions of a third party, we should be depriving them of their rights of law before the courts. Parliament would not wish to do that. It is one thing voluntarily to contract to give up those rights, which is an option, but another to remove them. That is why that clause was included. I hope that the building societies will not seek to abuse the clause or use it lightly. They can expand the scope of the scheme beyond the basic minimun that is already in the Bill.
The hon. Member for Ipswich (Mr. Weetch) asked whether the Government would have any further thoughts on the Bill. The Government tabled several hundred amendments between Committee stage and Report, arid I doubt whether the ingenuity and investigative powers of the draftsmen are as yet exhausted, so there may be another opportunity to improve and refine the Bill.
In the secure knowledge of all-party support for this fresh initiative, the Government are happy to leave the matter as it is for the time being.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 14

INVESTIGATION OF COMPLAINTS: SUPPLEMENTARY PROVISIONS

'(1) A building society, as a member of a recognised scheme, shall discharge any obligations and is entitled to enforce any rights imposed or conferred by the scheme or any determination of the adjudicator under the scheme, but nothing in section (Schemes for the investigation of complaints), this section or a scheme requires or authorises a building society to do anything which is outside its powers or otherwise contrary to any provision of this Act or any instrument under it.

(2) Determinations of complaints under recognised schemes shall be made by reference to what is, in the adjudicator's opinion, fair in all circumstances of the case and any direction given to a building society or associated body by an adjudicator may (if the complainant accepts the determination) require it and the complainant to vary any contractual or other obligations or rights subsisting between them.

(3) Subject to subsections (4) and (5) below, a determination of the adjudicator under a recognised scheme which is, by virtue of the complainant's acceptance of it, binding on the building society or associated body shall be final and conclusive and shall not be questioned in any court of law.

(4) Subsection (3) above does not apply where a society or associated body is authorised by the scheme to relieve itself of its obligation to take the steps it is directed to take or pay the


compensation awarded by the society's undertaking an obligation to give the requisite publicity for the reasons for not doing so and the society undertakes that obligation.

(5) Where a determination of the adjudicator under a recognised scheme is binding on the building society or associated body, the adjudicator shall, at the request of the society or associated body, state a case for the opinion of the High Court on any question of law and the High Court may direct the adjudicator to reconsider the complaint.

(6) A decision of the High Court under subsection (5) above shall be treated as a judgment of the High Court within the meaning of section 16 of the Supreme Court Act 1981 or section 39 of the Judicature (Northern Ireland) Act 1978 (which relate to the jurisdiction of the Court of Appeal to hear and determine appeals from any judgment of the High Court) but no appeal shall lie from the decision of the High Court on any case under subsection (5) above without the leave of the High Court or of the Court of Appeal.

(7) In the application of this section to Scotland—

(a) for the references in subsection (5) above to the High Court there shall be substituted references to the Court of Session; and
(b) subsection (6) above shall be omitted.

(8) If a building society fails to comply with section (Schemes for the investigation of complaints) (3) the society shall be liable on summary conviction—

(a) to a fine not exceeding level 4 on the standard scale; and
(b) in the case of a continuing offence, to an additional fine not exceeding £100 for every day during which the offence continues;

and so shall any director of the society who is also guilty of the offence.

(9) If a building society fails, without reasonable excuse, to comply with section (Schemes for the investigation of complaints) (5) the society shall be liable on summary conviction—

(a) to a fine not exceeding level 4 on the standard scale; and
(b) in the case of a continuing offence, to an additional fine not exceeding £100 for every day during which the offence continues;

and so shall any director of the society who is also guilty of the offence.

(10) If a building society fails to comply with section (Schemes for the investigation of complaints) (3) or (5) the Commission may make an application to the High Court for an order directing the society to comply within a specified period with that subsection and the High Court may, if it thinks fit, make an order accordingly.

(11) In subsection (4) above the reference to an obligation to give the requisite publicity for a building society's or associated body's reasons is a reference to such an obligation undertaken in pursuance of a provision of the scheme authorised by paragraph 6(2) or (3) of Schedule (Schemes for investigation of complaints).'.—[Sir George Young.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 15

SETTLEMENT OF DISPUTES

' .—(1) Schedule (Settlement of disputes) to this Act shall have effect for the settlement of certain disputes between a building society and a member, or a representative of a member, of the society or, as provided by Part II of the Schedule, between a building society and a depositor with the society.

(2) Nothing in that Schedule affects the jurisdiction of any court to hear and determine disputes arising out of any mortgage or any contract other than the rules of a society.'. — [Sir George Young.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 16

TRANSFER OF BUSINESS TO COMMERCIAL COMPANY

' .—(1) A building society may, in accordance with this section and the other applicable provisions of this Act, transfer the whole of its business to a company (its "successor").

(2) The applicable provisions of this Act other than this section are section (Transfers of business: supplementary provisions), section (Regulated terms: compensation for loss of office, etc), section (Regulated terms etc: distributions and share rights), section (Protective provisions for specially formed successors), section (Transfer regulations), pargraph 27A of Schedule 2 and Schedule (Transfer of business: supplementary provisions).

(3) The successor may be a company formed by the society wholly or partly for the purpose of assuming and conducting the society's business in its place or an existing company which is to assume and conduct the society's business in its place; and for the purposes of the transfer the society may, notwithstanding anything in section 16, form, or acquire and hold shares in, a company whose objects extend to the carrying on of activities which a building society has no power to carry on.

(4) In order to transfer its business to its successor a building society must—

(a) in the case of a specially formed company, secure that it is formed having articles of association with the requisite protective provisions;
(b) agree conditionally with its successor in a transfer agreement on the terms of the transfer which, in so far as they are regulated terms, comply with section (Regulated terms: compensation for loss of office, etc), section (Regulated terms etc: distribution and share rights) and transfer regulations;
(c) approve the transfer and the terms of the transfer by the requisite transfer resolutions, that is to say, resolutions passed by the members of the society in accordance with paragraph 27A of Schedule 2 to this Act; and
(d) obtain the confirmation of the Commission of the transfer and its terms..

(5) In so far as the transfer agreement made between the society and its successor provides for rights to be conferred on members or officers of the society, whether or not in pursuance of regulated terms, the members or officers shall, in relation to those provisions, be treated as if they had been parties to the agreement and the rights shall be enforceable accordingly.

(6) If the Commission confirms the transfer under section (Transfers of business: supplementary provisions) then, on the vesting date, all the property, rights and liabilities of the society making the transfer (whether or not capable of being transferred or assigned), except any shares in its successor, shall by virtue of this subsection and in accordance with transfer regulations be transferred to and vested in the successor.

(7) Where a building society continues to hold shares in its successor after the vesting date, the consideration (if any) for the disposal of the shares together with any other property, rights or liabilities of the society acquired or incurred after that date shall, by virtue of this subsection, be transferred to and vested in its succesor on the date specified for its dissolution under subsection (10) below.

(8) A building society which has obtained confirmation of the transfer of its business shall send to the central office notice of the date which is to be the vesting date and shall do so not later than seven days before that date; and the central office shall record the date and, if a later date is notified under subsection (10) below, that date, in the public file of the society.

(9) Except where notice is given under subsection (10) below, a building society which under this section, transfers its business to its successor shall, by virtue of this subsection, be dissolved on the vesting date; but the transfer effected by subsection (6) above shall be deemed to have been effected immediately before the dissolution.

(10) A building society may, for the purpose of facilitating the disposal of shares in its successor, include in the notice of the vesting date under subsection (8) above notice of a later for the dissolution of the society; and, if it does so, the society shall by virtue of this subsection be dissolved on that date instead of the vesting date but the transfer effected by subsection (7) above shall be deemed to have been effected immediately before the dissolution.

(11) As from the vesting date a society which has given notice under subsection (10) above shall cease to transact any business except such as is necessary for the purpose of securing the disposal of the society's holding of shares in its successor.

(12) In this section, and the other applicable provisions of this Act—
company" means a company within the meaning of the Companies Act 1985 or the Companies Act (Northern Ireland) 1960 which is a public company limited by shares; and a company is a "specially formed" company if it is formed by a building society (and by no others than its nominees) for the purpose of assuming and conducting its business in its place and is an "existing" company if it is a company carrying on business as a going concern on the date of the transfer agreement.
confirmation", in relation to a transfer, means the confirmation of the Commission required by subsection (4)(d) above;
regulated terms" means any terms of a transfer agreement which are regulated terms under section (Regulated terms: compensation for loss of office, etc), section (Regulated terms etc: distributions and share rights) or section (Transfer regulations),
the requisite protective provisions" means the provisions required to be made by section (Protective provisions for specially formed successors) (2);
the requisite transfer resolutions" has the meaning given by subsection (4)(c) above;
successor", in relation to a building society, has the meaning given by subsection (1) above;
transfer agreement" means the agreement required by subsection (4)(b) above and, in relation to it, "conditionally" means conditional on the approval of the transfer by the requisite transfer resolutions and on confirmation of the transfer;
transfer of business" means the transfer of the business of a building society to its successor under this section and "transfer" has a corresponding meaning;
transfer regulations" means regulations under section (Transfer regulations); and
the vesting date" means the date specified in or determined under the transfer agreement as the vesting date for the purposes of subsection (6) above 2 ' — [Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following Government new clauses:
No. 17 — Transfers of business: supplementary provisions.
No. 18 — Regulated terms: compensation for loss of office, etc.
No. 19 — Regulated terms etc: distributions and share rights.
No. 20 — Protective provisions for specially formed successors.
No. 21 — Transfer regulations.
No. 22 — Cancellation of registration.
Government amendments Nos. 113 to 123, 211, 220, 229, 230, 254 and 272.

Mr. Stewart: New clause 16 relates to the conversion of building societies into limited companies. Our principles in approaching the matter have been clear. First, any such decision by the members of a building society must be made with clear support from investing and borrowing members and from a significant proportion of the entire membership. It is an important change in the nature of the business of a building society to move from mutual to incorporated status, and it would be wrong for such a change to be made without the strong support of the society's members.
Secondly, we have been anxious to ensure that the process protects the rights and interests of members in. such a way that it does not, at the same time, encourage members of the public to switch their funds around in the market on a speculative basis hoping to make a quick profit, which has happened in the United States.
5.30 pm
Thirdly, we felt that limits should be placed on the compensation payable to outgoing directors so that conversion is not a course of action promoted by management in its own interests. I think that those principles are supported not only by the Building Societies Association, but by both sides of the House.
The details of the clauses have been carefully worked out, but the main question is one of principle. The Bill sets out a regime for all societies, large and small, local and national. It may be that as financial markets develop some societies will want to develop more rapidly than the Bill allows. I see no reason to prevent that, provided they have the overwhelming support of their members. It seems to be the essence of mutuality that members should take the crucial decisions. That is what we are providing in this procedure.

Mr. Christopher Hawkins: rose——

Mr. Stewart: I hope that my hon. Friend will contribute to the debate, but I would just like to finish this passage.
It may also be useful if there is a degree of diversity in the movement as to whether all building societies remain as mutual institutions. However, the possibility of converting into incorporated status would add to the range of types of society or mortgage-providing institutions.
I should like to listen to the debate and, if I am fortunate enough to catch Mr. Speaker's eye at the end, I could then respond to the points raised. At this stage I should like to say that I have taken careful note of the arguments put forward during the passage of the Bill so far, but they have not convinced me that conversion is wrong in principle. I am now more than ever sure that it is an option which should be available, subject to the necessary safeguards and principles that I have described. Therefore, I should like to respond more fully when I have heard the views of my hon. Friend the Member for High Peak (Mr. Hawkins) and other hon. Members.

Dr. Oonagh McDonald: So far the debate on the new clauses has proceeded amicably, with agreement between the two sides of the House, but I tear that at this point the two sides will differ.
I understand that the Minister has carefully considered what safeguards can be built into the process of conversion from a mutual organisation to a plc, and I appreciate that he has resisted pressures to, for example, decrease the percentage of members who would necessarily have to vote for such a conversion. One must be grateful for small mercies. It is a small mercy, because for a variety of reasons we do not see the necessity for building societies to convert from mutual organisations into plcs. I know that the Minister is aware of some of the reasons that have been presented by the Opposition, but I hope that even at this late stage he will reconsider his decision.
Several points need to be made in connection with the process of conversion. First, during the progress of the Bill the Minister has considered in great detail what sort of


legislation is necessary for building societies and just how he can ensure that the legislation is correct and will not cause undue difficulties. However, he has not attended sufficiently to the fact that changes in the nature of the building societies are being proposed and will take effect shortly after other aspects of the financial markets will have undergone major changes. If nothing else, conversion to plcs ought to be postponed until one sees what the effects of the so-called big bang, due to take place at the end of October, will be. Therefore, I would recommend even more caution than the Minister has proposed.
Secondly, the proposal to allow the conversion to company status, taken together with the proposal to allow for contested mergers, can speed up the concentration of the number of building societies. Indeed, even without the provisions in the Bill, mergers are taking place, leading, for example, the chief executive of the Abbey National building society, Mr. Peter Birch, to say recently that he expected that over a period of 10 years there would be only five mega-building societies and possibly a number of smaller building societies.

Mr. Christopher Hawkins: I wonder whether the hon. Lady is aware that it is not only conversion that is the threat. New clause 16(3), which was not in the original Bill discussed in Committee, says that the successor company may be an existing company. In other words, an existing company, such as a foreign bank, may take over a building society even though it has not converted to plc status.

Dr. McDonald: I thank the hon. Gentleman for making that point. I was about to move on to the problems that I consider are caused by takeovers. The two provisions in the Bill that I have mentioned can speed up the process that the hon. Gentleman has in mind, although, as he rightly says, it can happen without conversion to company status. That is a matter of concern.
I am concerned because I believe that over a period of time, though obviously not immediately after the Bill takes effect — probably in April next year — we will find ourselves with a small number of large financial institutions. Because of the possibility of the takeover of existing building societies by foreign banks—we know that some foreign banks, such as Citicorp and Standard Chartered have already shown their interest in this matter — we shall have a small number of financial institutions, large in size, but without any particular commitment to the provision of finance for housing. They will obviously continue to offer mortgages, because I think that the mortgage market will continue to grow for the rest of this century, but they will have no prime commitment to housing.

Mr. Robert McCrindle: Has that not already taken place, as in the past year or two the joint stock banks have moved heavily into providing mortgages?

Dr. McDonald: It is true that other organisations also offer mortgages. For many years we have had the benefit of a range of institutions primarily concerned with financing housing. As we know, the Bill allows building societies to provide other financial services. The building

societies have enormous assets—£100 billion. This is an important source of finance to be concentrated on the provision of housing, either through mortgages, or through the provision of something which we in the Labour party strongly favour—housing provided through part equity and part rent. This enables young couples especially to purchase their first house more easily than by raising the deposit for a mortgage or by facing the prospect of a 100 per cent. mortgage.

Mr. Teddy Taylor: The hon. Lady has obviously studied the matter more thoroughly than I have, but my understanding is that under subsection (3) it would be possible for Citibank to buy the Halifax building society in its present form. There seems to be a real threat, which must be considered carefully.

Dr. McDonald: I think the hon. Gentleman is unaware that that point was made earlier and that I accepted it. I am trying to develop the argument that conversion to plc status will also facilitate the process. That is why I have argued against that point of view. I have argued the possibility that large financial institutions may not have the commitment to housing that building societies have.
The point has been made that building societies need the possibility of such conversion to provide themselves with adequate capital funds, despite the fact that the Building Societies Association, in its bulletin of October 1985, stressed that owing to the mutual nature of the building societies they were readily able to raise funds, and had successfully done so, on the wholesale market. The argument that conversion to plc status is necessary to provide building societies with adequate funds is one that we need not take too seriously.
I cannot understand the Government's prejudice against the continued existence of mutual organisations. It is a perfectly proper, respectable and successful alternative to company status. Why not encourage its continued existence? It is true that criticisms can be made of the nature of the mutuality of building societies. Perhaps that was not the case in years gone by when building societies were smaller. Nevertheless, building societies have been able to concern themselves to a greater extent with social objectives, with concerns and needs, of which housing is a fundamental aspect. Conversion of building societies to plc status and being swallowed up by banks which are concerned, not with the social need of housing but with all kinds of financial provision, and so on, is a step backwards, and not a step forwards.
For the reasons that I have outlined briefly — the argument was put both on Second Reading and in Committee — the Opposition are firmly convinced that the provisions in the new clauses are wrong. Therefore, we shall reject and vote against them.

Mr. Heddle: I shall not approach the subject as analytically and with the same economic expertise as the hon. Member for Thurrock (Dr. McDonald), but I agree with much of what she said. I think that on a point of detail the hon. Lady was wrong to advise the House that the Standard Chartered bank was a foreign bank. I am reliably informed by my hon. Friend the Member for Ludlow (Mr. Cockeram) that the Standard Chartered bank is British, is proud to be British and hopefully will remain British. I agree with some of the hon. Lady's sentiments. I approach the matter from the point of view of sentiment.
Although the Bill, in broad terms, will enable building societies to extend into a much broader field, way beyond the definition of mutuality — with which I have no quarrel whatsoever—I am concerned that new clause 16 could, in certain circumstances, enable our much-loved building societies, which many of us associate with our towns, counties and regions, to become multinationals. It might be fine for certain large building societies to become part of the First National Bank of Chicago, but it would not necessarily be right for the Staffordshire building society to do so, because it might become a nameless and faceless subsidiary of a nameless and faceless multinational which breaks the link between the borrower and the lender. I believe that the link between the borrower and the lender is a fundamental, vital and almost unquantifiable benefit of the building society movement as we know it today.
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Perhaps I can illustrate the point by narrating a story that was told to me by the chairman of one of the major building societies at the recent annual conference of the Building Societies Association held in Bournemouth. He reminded me of a lady who went into her local branch of his building society wanting to withdraw £1,000 from her savings account. She had only about £1,000 in her account. She said to the counter clerk, "Do not worry, young man. I only want that money to buy clothes and books for my daughter who is going to university in September. I promise you that I shall put the money back as soon as I can." The lady had a direct relationship with, and a direct loyalty and obligation to, her building society. If she had been the customer of a bank, she would not have cared a tuppenny damn about putting back the money. There is not the same loyalty between a bank and its customers as there is between a building society and its customers. If that sense of mutality is broken, which the new clause will enable financial institutions to do, that link of loyalty, which is inestimable, will be broken.
What worries me about the clause is that it is not only another lending institution, another savings institution, or another bank that will be enabled to take over a building society. As I understand it, any company—national, international or multinational—could do so. Therein lies a real cause for concern.
In my constituency of Mid-Staffordshire, the much-loved and very British 200-year-old company of Wedgwood is under threat of takeover by the London International Group, formerly known as the London Rubber Company. No doubt it is well known and much respected for producing certain rubber goods to meet the everyday requirements of some people, but what expertise and qualifications does that American-owned company have for taking over a ceramics company that manufactures tableware that hon. Members in this and another place use every day? The company has no real understanding of the highly specialised, top-market sector of the industry.
What about job security? What undertaking would the company give to the shareholders and employees of Wedgwood if other parts of that conglomerate play-pen based in the United States or elsewhere were to fall prey to the international economic recession? What job and economic security would the shareholders of that company have? Let us suppose that the London International Group, formerly known as the London Rubber Company, took

over the Goldhawk building society, the Staffordshire building society or the Abbey National building society. Let us assume that there was a down-turn in the market for rubber gloves in Ohio or elsewhere and the company was forced into liquidation. In what position would that leave the borrowers of mortgages from the Goldhawk building society, the Staffordshire building society or the Abbey National building society?
Let us take the example of a constituent of mine who falls, through no fault of his or her own, into arrears. He or she does not have the same relationship with the local manager, because the local manager does not have the same relationship with head office, because head office is not situated in Stafford, Birkenhead or Burgess Hill. It is probably somewhere in Baltimore or Boston, and so there is not the same link, loyalty or understanding between lender and borrower as was highlighted in the case of the lady who wanted to borrow £1,000 to provide books and clothes for her undergraduate daughter.
I am concerned about the new clause. I did not serve on the Committee, and so I did not have an opportunity to express these views. However, I expressed them to members of the BSA at the annual conference of the Metropolitan Association of Building Societies. I hope that my hon. Friend the Economic Secretary will consider those points and will withdraw the new clause to allow further debate within the building society movement and to allow wider debate, as the hon. Member for Thurrock said, after the big bang. Incidentally, that big bang may well turn out to be a little whimper. The new clause could then be reintroduced, in the light of experience, in the other place.

Mr. Oakes: I agree with what my hon. Friend the Member for Thurrock (Dr. McDonald) and the hon. Member for Mid-Staffordshire (Mr. Heddle) have said. The hon. Gentleman was absolutely right about the building societies. People invest their savings in building societies rather than in banks partly because, as the hon. Gentleman said, there is a mutuality of trust and understanding between the society and its customer. That mutuality is never felt between a bank, even a small bank, and its customer. The investor in the building society knows that his money is not only safe but will be used to provide a mortgage to give someone a home. The investor can feel quite proud of his investment.
I imagine that the new clause was initiated by the Treasury rather than by the BSA or individual building societies. I do not know who asked for it, but it can only be the Treasury that wants to convert building societies into plcs. Apart from the Treasury, I do not know of anyone who wants the new clause. But perhaps we are worrying unduly. After all, the new clause requires that 20 per cent. of the building society's subscribers must vote and that 75 per cent. of them must agree before the society can be converted into a limited company. It takes some doing to persuade 20 per cent. of borrowers to vote. Big societies have run major campaigns but have not managed to get even 10 per cent. to vote.

Mr. Christopher Hawkins: They could be bribed to vote.

Mr. Oakes: I do not know about that, but I agree with the hon. Member for Mid-Staffordshire that those who vote will do so out of loyalty to their society, and so will not want it to be turned into a limited company.
Moreover, the new clause gives the Treasury power, by negative resolution of the House, to alter that 20 per cent. figure. If building societies could not get 20 per cent. of their members to vote, or anything like that number, would the Treasury reduce the figure to 10 per cent. or 5 per cent.? If so, there is a grave danger of that mutuality disappearing. We want building societies to be brought into the modern world. That is what the Bill is about. We want to transform the 1871 Act into a 1986 Act in order to allow building societies to compete in the modern world, but we also want to preserve the peculiarly British nature of building societies and to retain that mutuality. I fear that the new clause, which has been introduced solely at the whim of the Government, could destroy that mutuality.

Mr. Christopher Hawkins: I merely wish to ask my hon. Friend the Economic Secretary two questions which I would have asked during his speech if he had given way. First, why do we want to allow companies which are not building societies to buy building societies, including those which have not converted? It would be interesting to know the reasons for that. Secondly, there is a technical problem with new clause 19. Subsection (4) specifies the bribes that may be paid to people voting for or against converting a building society into a plc. I have been over this issue with people in the BSA and in building societies, and none of us can make head nor tail of it.
Half the time the new clause appears to say that bribes can be paid only to people who have less than £100 in the building society, and thus to people who do not qualify to vote. I refer to subsection (2)(b), which is qualified by subsection (4). In other parts, the new clause seems to suggest that payments could be made to people with more than £100 in the building society. Clearly it is important that building societies should know exactly what the new clause means. I should be grateful if my hon. Friend the Economic Secretary would explain it to me now. If he has as much difficulty as the rest of us in understanding its drafting, perhaps he will drop a line to me and to the BSA.

Mr. Craigen: I did not like the idea of a building society converting to plc status when it was discussed in Committee. I think that the provision has been reintroduced because several Conservative Back Benchers did not like the idea either. Treasury Ministers felt that they had to assuage in some way their Back Benchers' feelings. Indeed, the hon. Member for Mid-Staffordshire (Mr. Heddle) has outlined some of the concerns.
I found the Economic Secretary's reasoning rather faulty — and I am being generous to him. He had already made up his mind. Yet he came to the House and told us that he did not have much to say today, but that he would listen, as though he might be converted at the end of the debate. Judging by his actions and statements, and by the way that he dealt with the subject today, it is obvious that his mind is made up.
Like my right hon. Friend the Member for Halton (Mr. Oakes), I just wonder what has generated this great desire for conversion. That word conversion makes people think immediately of some religious connotation, as though conversion would be a bracing experience for everybody. But it will be nothing of the kind. We are really talking about immersion, whereby the whole character of the building society movement will be changed. I suspect that

the building society movement will be led away from its original purpose, which was to finance house purchase and home improvements. There is a danger that following the helter skelter towards conversion, as the Treasury puts it, we shall end up with more banks than the economy requires.
The Economic Secretary has never fully dealt with how he thinks that the building society movement will benefit from this proposed change. He has not really answered the points that have been made, not only today but in Committee, about whether, in the long run, this will strengthen the building society movement or, as many of us believe, will weaken and divert the building society movement from its purpose.
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Like my right hon. Friend the Member for Halton, I have a non-pecuniary interest as an honorary vice-president of the Building Societies Association, but that does not mean that I cannot say what I think, and I think that the United Kingdom does not need any more clearing banks. The Economic Secretary has somewhat fogged the issue of principle by the way that he has tried to impose his ideas on conversion of building societies to company status, and even by the way in which the consultative paper came up out of the blue. People were told that it will be a great thing if the Government allow building societies to become companies, when, for many years, they have been functioning satisfactorily as mutualities.
Like my right hon. Friend the Member for Halton, I agree that there is a need for improvement, but there is great danger that if the Government have their way in the new clause this will reduce the potential that is available to the ordinary man or woman to acquire housing finance either for home purchase or improvement. I fully support the points made by my hon. Friend the Member for Thurrock (Dr. McDonald).

Mr. Austin Mitchell: It is important that the Labour party adds its voice to the doubts that have been expressed by Conservative Members. Given that the Minister heard so many hostile speeches. and that so many critical doubts were raised on this matter, I would find it surprising if he persevered with this new clause, for which there is no great need. He said that he was open to argument and would listen to it, but as he has not listened to the serious doubts raised in Committee, he will not be listening to the arguments now. He will not be accommodating himself to the views of the House and his party but will be steamrolling the clause through with the backing of the Government's majority. That is wrong.
It is important that the Labour party emphasises its opposition to the nature of this proposal. If the Minister perseveres with it, we shall vote against the new clause. I hope that he will make some accommodation to the doubts that have been expressed. We are talking about a substantial change in the nature of building societies for which no good reason has been given.
I do not see pressure from the building societies for this. I know that some would like to spread out into the financial services sector, but they wish to do so always on the basis of the organisation and principle from which they sprang, the good, sound and extremely important basis of mutual principles. That differentiates them from other predatory financial institutions which are much more the embodiment of organised greed.
Why are the Government allowing this important principle to be undermined? The Minister has given no adequate reason for taking an axe to the whole trunk of the building society movement. That movement involves people who have a habit of thinking in terms of their building society and feeling some participation in it, even if they do not attend meetings and take but little interest. That is important to maintain because it conditions the thinking of the people who run the building societies. We should not like to see their transformation into just another predatory financial institution, working for their own interests and those of organised greed.
In Committee, we argued about whether building societies were Socialism in action or capitalism in action at the level of the ordinary man. The mutual principle means that they are at the level of ordinary man, and we want to keep them there and keep their unique nature. That is a strong reason for voting against the new clause.

Mr. Michael Shersby: I am disturbed by what I have heard in the debate. I did not serve on the Committee and I came into the Chamber to listen to the debate and speak later. However, I now have some questions to ask my hon. Friend the Economic Secretary to which I would like a reply.
Can my hon. Friend give reasons for the policy contained in this new clause? Is it a fact that building societies, on conversion, can he taken over not only by banks and other companies in the United Kingdom but by banks in other countries? If that is so, would we not possibly face, in some years' time, the situation in which the major building societies were owned by a number of dominant banking groups, and the ownership of the societies, taken together with the business that such companies already transact in the market, might produce an even more dominant position?
I am concerned about the possibility that our building societies might be owned by consortia of American or Community banks. The unique feel that the building societies have for most people might then be diminished. What are the reasons for that policy? I was not aware of its inclusion in the Bill when it was originally published, and so I am rather surprised to find ourselves debating it now.
I should also like my hon. Friend to comment on the approval that needs to be given for such transfer by the members. As I understand it, the conversion requires a 20 per cent. vote of which 15 per cent. must be in the affirmative. In many cases, borrowing members of building societies will take the lead from the chairman of that society and from others who recommend a particular course of action. Many of them will cast their votes in accordance with advice, while others will take advice from their professional advisers, whether banks, solicitors, accountants or whoever may advise them. Is my hon. Friend satisfied that, in the event of such a major step being contemplated by a society, the ordinary members of the building societies who not only support them with their savings but depend upon them for their mortgages will be fully informed and able to play an active role in making decisions of this magnitude?

Mr. Ian Stewart: I begin by saying in self-defence to the hon. Member for Glasgow, Maryhill (Mr. Craigen) that it seemed to me proper to introduce the new clause briefly so that the House could have an opportunity to

debate it properly before I attempted to respond to the questions. I am not sure whether he would have been any happier if I had tried to respond to the questions before hon. Members had had a chance to put them. However, my attempt at courtesy to the House has been misunderstood, so I hope that it will accept that that is what I had in mind.
My hon. Friend the Member for Uxbridge (Mr. Shersby) said that he had recently come into the Chamber and was disturbed by what he had heard. He has every right to be disturbed because the case has been overstated. I recognise the anxieties that have been expressed on both sides of the House, as I recognised them in Committee. The Government have been mindful of the controversial nature of conversion, not only back to the original introduction of the Bill, when we published the discussion document about these proposals, but back to the earlier Green Paper and the earlier stages of the discussion, We need to measure the likely developments of the building society movement against the actual impact of the proposals that are included in the new clauses.
I thought that the right hon. Member for Halton (Mr. Oakes) was fair minded when he said that in practice these would be difficult criteria to meet. One has to accept that the whole debate should be in the context of the fact that these proposals are not meant to be an easy option. They are not proposals that can be lightly nodded through by a few members without the general support of the membership of the societies.
However, I must put the right hon. Gentleman right about one point. The hon. Member for Glasgow, Maryhill (Mr. Craigen) raised the same point. They said that nobody wants these proposals, that they have been cooked up by the Treasury and that the Government do not have many supporters for them. These proposals were first put forward by the Building Societies Association, of which the right hon. Member for Halton is a distinguished vice-president, in its 1983 discussion paper. In its brief for the Report stage of the Bill, the Building Societies Association says:
The Association considers that it is necessary to have a procedure by which a building society can convert to another corporate form with the agreement of its members, although it doubts whether many societies will wish to consider this option.
That is probably a fair and balanced assessment of what is likely to happen. The Government's proposals——

Dr. McDonald: Will the Minister give way?

Mr. Stewart: In a moment, when I have finished my sentence.
The Government's proposals have been designed to strike exactly this balance between not making this process impossible and at the same time imposing quite significant requirements. In her opening remarks the hon. Lady was good enough to say that she accepted the fact that I had been under some pressure to make the requirements less stringent but that I had resisted that pressure.

Dr. McDonald: The Minister referred to the BSA report. I think I am correct in saying that in mentioning the 1983 report the Minister was referring to the extremely ambitious Spalding report, which was much modified in later reports by the BSA as to how it viewed the future. The Spalding report was over-ambitious and was very much watered down in later BSA reports. Therefore, it is not fair to take the BSA's Spalding report as a guide. To my knowledge, it has been primarily the Abbey National


building society that has favoured conversion status. Belatedly, possibly feeling that it must follow in the footsteps of the Abbey National building society, the Halifax building society has come round that point of view.

Mr. Stewart: I do not want to spend too long on the history of this matter. However, I have been told that it was dreamt up by the Treasury. I have pointed out that it has a longer history and that originally this idea was initiated by the Building Societies Association. I accept the hon. Lady's point that in its latest form the association is not quite so enthusiastic about the idea as it was originally, but that does not mean that the BSA believes that this route should not be open at all. I find myself very much in agreement with the Building Societies Association about this.
I do not think that our proposals are likely to lead to any great rush to conversion. Indeed, I should not have wanted them to be formulated in the way in which they are formulated if that had been the likely consequence. However, I agree with the right hon. Member for Halton and with the Building Societies Association in its note to hon. Members that this is not an option that many societies will want to consider.
In some quarters I have been strongly criticised for making the requirements far too difficult. In other quarters I have been criticised for apparently making it possible for a mad rush to take place by the whole of the building society movement towards conversion. My view is that the truth, as is so often the case, lies in between the two, and that the proposals that we have put forward are realistic. They are not permissive, in the sense that they make it easy for members of building societies to take the decision to convert. At the same time, they are not unattainable.
The hon. Member for Thurrock (Dr. McDonald) suggested that I might have some prejudice against mutual status. That is certainly not the case. The hon. Member for Maryhill asked how these proposals would strengthen the building society movement. I have the same respect for the building society movement as he has. I appreciate the qualities of loyalty and the traditions that have given the building society movement its strength. I do not wish to dismantle all that. Certainly I do not want an Act that I have taken through this House to be on the statute book which would lead to such a consequence. There are many provisions in the Bill which strengthen the concept of mutuality. I do not intend to rehearse them now, but they give members a greater opportunity to take part in the affairs of building societies. They also give members better opportunities to vote on issues than they have ever had under the existing legislation. Therefore, I do not think that I can fairly be accused of doing anything to dismantle the mutual principle. Indeed, I hope that we have given it a new strength and a new lease of life.

Mr. Austin Mitchell: I still do not follow the argument on the central point of why the mutuality principle should be weakened in any way. We are sending this pristine maiden, the building societies, out into the financial jungle where dangers abound and rapists throng. Why, in any sense, loosen the lock on the chastity belt?

Mr. Stewart: I think that I ought to resist following too far the imagery that the hon. Gentleman has conjured up, particularly in view of the nature of the bidder for Wedgwood, and various other matters that have been brought into the debate.
However, let me reflect for a moment on the point that the hon. Gentleman has raised, because it is important. We have had to face a problem in trying to legislate for the building society movement. I am sure that it is necessary at this stage to have a single legislative framework for building societies. Building societies can be very large, national institutions, or they can be small local or regional societies. Their needs are diverging.
If the option of conversion under certain circumstances had not been available, it would probably have been necessary to draft a Bill that went wider as to the business that can be conducted by building societies as mutual institutions in order to take account of the realities of the situation and of the way in which the financial markets are developing. The building societies must continue to compete in that market. It is no good saying, on grounds of sentimentality, or whatever it may be, that all building societies have been lovely in the form in which they have existed for more than 100 years and that we want them to stay that way, regardless of whether they will be able to attract the necessary funds for future mortgage lending if they stay exactly as they have been for all that time.
We came to the conclusion that it would be right to allow a degree of flexibility within the Bill so that further stages of relaxation and gradual evolution could be permitted over the years and that it would also be right to allow the small and very limited number of societies that might feel they are too much constrained by the legislation —perhaps because they need further capital to compete on the scale on which they are conducting their business — to convert themselves into limited companies and therefore to be able to step outside the framework of building society legislation. That enables us to maintain one regime for all societies. It is a better solution than either constricting societies too much or widening the provisions of the Bill in such a way that many other societies that do not want to convert might then lose their identity and change their nature very much more rapidly than any right hon. or hon. Member would like them to do.

Mr. Heddle: What my hon. Friend has just said does not put my mind at rest. I have listened very carefully to what he said. He says that he respects, but does not believe that he can be persuaded by, the views expressed by hon. Members and me on this aspect, because the Building Societies Association says that if this new clause is carried tonight it will relate only to one or two societies. I do not believe that to be a particularly valid argument. It was Adam who is reputed to have said to Eve, "You know, my dear, we are living in changing times." What may be true today may not be true this time next month. The permission that the House might give to the building societies industry if it passes this new clause this evening is not simply, as I understand it. to allow building societies to change from being mutual societies to public liability companies. That I can live with. I can understand why building societies might wish to do that for the reasons that my hon. Friend has just given. It will enable them to raise capital and meet much more easily the requirements of those who want to buy houses. I stand corrected if my hon.


Friend can persuade me, but I believe that the clause goes much further. It will enable building societies, having become plcs, then to become subsidiaries of multinational conglomerates whose prime function may have nothing whatever to do with the provision of——

Mr. Speaker: Order. This is a Report stage. The hon. Gentleman is intervening to ask a question, not to make a further speech.

Mr. Heddle: I am grateful for that, Mr. Speaker. I was trying to establish whether my hon. Friend had understood the fears and concerns that I expressed earlier. I am seeking clarification and comfort from my hon. Friend on behalf of borrowers and lenders of the Staffordshire building society in my constituency. It just so happens that my constituency chairman is also chairman of the Staffordshire building society. It might find, having been taken over by the London Rubber Company—which also wishes to take over Wedgwood in my constituency —that it is forced into liquidation because the market for rubber gloves in America——

Mr. Speaker: Order. We must get back to the clause. If the hon. Gentleman asks a question, no doubt the Minister will answer it and then we must get on.

Mr. Heddle: My question to my hon. Friend is: what protection will lenders and borrowers of building societies in the United Kingdom have in the event of the clause going through because it will enable building societies, having been converted to plcs, to become subsidiaries of multinational companies, leaving that borrowers' and lenders' link inextricably ruined?

Mr. Stewart: I wonder whether my hon. Friend will permit me to intervene in his speech. I was trying to be accommodating to the House in responding to the point made by the hon. Member for Great Grimsby (Mr. Mitchell). I said at the beginning that I would try to respond to the points raised in the debate. Most, in fact all, of the points raised by my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) have already been made in the debate and, therefore, I shall deal with them. However, I must continue my speech in order to do so.
I was talking about the general question. Although I have not satisfied the hon. Member for Great Grimsby, it is important that building societies should be enabled to respond to changing circumstances. The option of conversion should be open to them provided that the necessary safeguards exist.
I now come to the next general point which was raised in the debate and which my hon. Friend the Member for Mid-Staffordshire has now underlined, and that is the terms on which building societies could convert to companies and the safeguards and requirements for support from members to enable them to do so.
As my hon. Friend the Member for Uxbridge (Mr. Shersby) reminded the House, it is necessary in order to pass the resolution for conversion that 75 per cent. of those investing members of a society who vote should vote in favour of it. That is a prime requirement. It is also a prime requirement that more than 50 per cent. of borrowing members should also support such a resolution. That is an innovation in this legislation. Borrowing members have never before had significant rights in building societies, certainly not statutory rights which must apply to all societies. We have carefully introduced this because we

think that it is important when considering the possibility of changing the nature of a society from mutual status to incorporation that the borrowers should be happy with what is proposed. In many ways they are much more locked into the society than investing members. That provision has been generally welcomed.
In addition to that, we have a requirement that at least 20 per cent. of the members should vote and take part. The reason for that is that we do not believe that a significant change of the kind that is involved in moving from mutual status to a company should be taken without the active participation of a considerable proportion of members. There has been a lot of dispute about the 20 per cent. As the hon. Member for Thurrock reminded the House, there has been considerable pressure from certain quarters to reduce that figure because it has been described as an impossible hurdle. One should not necessarily go on the basis of experience. I hope that under the provisions of the Bill when enacted building societies will be encouraged to communicate much more frequently with their members. The relationship between the societies and their members will be strengthened by the very fact that societies will be able to offer more services and it will therefore be in their own commercial interests to communicate with members. That is one of the fundamental purposes of the Bill.
The climate in which building societies encourage members to take a greater interest in their affairs means that the threshold of 20 per cent. should be at a level which is higher than that which has been generally achieved in certain merger resolutions in the past. The cultural change which will follow from the implementation of the Act w ill move in that direction and therefore it is right that the hurdle should be at a level that is not prohibitive but certainly demanding.

Mr. Cockeram: Will my hon. Friend explain the apparent inconsistency in his argument? On the one hand he is putting forward the argument that this fundamental change is desirable and on the other hand he is going on to explain how difficult it will be to bring about that so-called desirable change. If he believes that this is so desirable, surely he should be making it easier. If, on the other hand, he is seeking to make it difficult, why is he introducing it at all?

Mr. Stewart: With great respect, my hon. Friend is putting words into my mouth. I never said that the change itself was desirable. I said it was desirable that there should be an option for that change to take place if members of a particular society wished it to happen. That is a different matter. The level of approval should not be prohibitive and I do not believe that the level of 20 per cent. is prohibitive. Equally, the possibility should not be excluded, and in that I agree with the Building Societies Association.
I must deal briefly with the question of takeover by public companies. That matter has caused a good deal of concern on both sides of the House.

Mr. Oakes: What sort of criteria does the Minister have in mind for a future Government, in co-operation with the commission, varying that 20 per cent. to possibly a much lower figure by negative resolution of either House, which would seriously undermine what we are talking about today?

Mr. Stewart: I can speak only for myself. We have no expectation of altering that figure. I have been under some


pressure to say that we would do so and to list the terms and conditions which would encourage us to do so. I do not want anyone, inside or outside the House, to get the impression that that figure is just a cockshy which we expect to change in a few months' time. It is not that at all. We believe that that is the right figure. If in the fullness of time the figure appeared to be wrong, it could be changed, but I do not think that the only factor to take into account would be the percentages achieved in particular cases. In addition to that, we would have to take into consideration the development of the building society movement and whether we wanted to change and make easier this particular form of conversion. As I say, in the foreseeable future we have no intention of doing that.
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Some rather worrying comments have been made by a number of hon. Members about takeovers. They have said that there might be takeovers by unsuitable bodies such as large foreign banks. I draw their attention to the practical provisions that are set out in the clauses and the demanding nature of the figures which are included in them. If there were to be a takeover by a limited company, 50 per cent. of members of a society would be required to vote in favour and not 75 per cent. of members with a threshold of 20 per cent. If I am told that 20 per cent. is unobtainable by those in some quarters, 50 per cent. would be a much more difficult hurdle to surmount. As an alternative, a takeover would have to be approved by the holders of 90 per cent. of the shares of a society, which again is an extremely high figure. It is the same figure as is required to trigger the special resolution procedure for the acquisition of an outstanding minority in the Companies Act in a takeover. As there are so many more shareholders in a building society than in a limited company, the percentage is very much more difficult to meet.
As the Government share the anxieties that have been expressed by some hon. Members and those of the building society movement that predators could move in on them, we have provided that takeovers may take place only in extreme circumstances where the overwhelming body of the members of a society want it to happen, and in practical terms I cannot see any likely prospect of that happening for a long time. Meanwhile, there will be a 15 per cent. minimum on any shareholding for the first five years of a building society's existence as a public company.
Taken together, I think that the proposals strike the right balance. The fact that the Government have been criticised from opposite directions for the measures that we are bringing forward reassures me that we have taken into account all the conflicting views which have been expressed on this difficult and contentious issue. Accordingly, I commend the clause to the House.

Dr. McDonald: I listened carefully to the Minister's reply and he revealed even more greatly his uncertainties about the measure that he is proposing. It has been rightly said by a Conservative Member that, on the one hand, the Minister is committed to allowing this process of change to take place while, on the other, he is uncertain about its usefulness and rightness and is trying to put as many obstacles in its way as possible. I hope that the House will

put a proper obstacle in the way of conversion to plc status because the Opposition intend to vote against all the new clauses that will allow that process to take place.

Mr. Christopher Hawkins: I remind my hon. Friend the Minister that, on behalf of a number of building societies, I asked whether he would explain the meaning of subsection (4) of new clause 19. When can bribes be paid to people to vote for conversion? Can a bribe be paid only to those with less than £100 in a society? Can it be paid only to those who have been in the society for more than two years? Before we vote on the new clause, we should understand what lies behind it.
When the hon. Member for Thurrock (Dr. McDonald) said that the new clause had been bounced in by the Treasury, I did not think that she was referring to conversion, which has been mentioned at times with support by the BSA. Who asked whether a company should be allowed to buy a building society which is mutual? The issue did not come before those who considered the Bill in Committee. That is the answer to those who say that it is a pity they were not members of the Committee. We are faced with a new clause on Report. In Committee, we understood that companies did not have the ability to buy building societies that had not converted. The position in Committee was that once conversion had taken place there could be a takeover. That was because the society had plc status. The position now is that a company can take over a building society, even if it has not converted.

Mr. Ian Stewart: I apologise to my hon. Friend for not responding to his question on new clause 19. I had intended to do so, but I was somewhat diverted by those of my hon. Friends who intervened in my reply. I shall write to the building societies, the BSA and to my hon. Friend on that issue. His other question was fully explained in the consultation document that we put forward in December.

Question put, That the clause be read a Second time: ——

The House divided: Ayes 229, Noes 148.

Division No. 204]
[7.10 pm


AYES


Abse, Leo
John, Brynmor


Adams, Allen (Paisley N)
Jones, Barry (Alyn &amp; Deeside)


Alton, David
Kaufman, Rt Hon Gerald


Anderson, Donald
Kirkwood, Archy


Archer, Rt Hon Peter
Leighton, Ronald


Atkinson, N. (Tottenham)
Lewis, Ron (Carlisle)


Bagier, Gordon A. T.
Lewis, Terence (Worsley)


Banks, Tony (Newham NW)
Litherland, Robert


Barron, Kevin
Livsey, Richard


Beckett, Mrs Margaret
Lloyd, Tony (Stretford)


Benn, Rt Hon Tony
McCartney, Hugh


Bennett, A. (Dent'n &amp; Red'sh)
McDonald, Dr Oonagh


Bermingham, Gerald
Maclennan, Robert


Boyes, Roland
McNamara, Kevin


Brown, Gordon (D'f'mline E)
McWilliam, John


Brown, Hugh D. (Provan)
Madden, Max


Bruce, Malcolm
Marek, Dr John


Buchan, Norman
Marshall, David (Shettleston)


Caborn, Richard
Martin, Michael


Callaghan, Jim (Heyw'd &amp; M)
Mason, Rt Hon Roy


Campbell, Ian
Maynard, Miss Joan


Campbell-Savours, Dale
Meadowcroft, Michael


Canavan, Dennis
Michie, William


Carlile, Alexander (Montg'y)
Mitchell, Austin (G't Grimsby)


Clay, Robert
Morris, Rt Hon J. (Aberavon)


Clelland, David Gordon
Oakes, Rt Hon Gordon


Clwyd, Mrs Ann
O'Brien, William


Conlan, Bernard
Orme, Rt Hon Stanley


Cook, Frank (Stockton North)
Park, George


Cook, Robin F. (Livingston)
Patchett, Terry


Corbett, Robin
Pendry, Tom


Corbyn, Jeremy
Penhaligon, David


Craigen, J. M.
Pike, Peter


Dalyell, Tam
Radice, Giles


Davies, Ronald (Caerphilly)
Randall, Stuart


Davis, Terry (B'ham, H'ge H'l)
Redmond, Martin


Deakins, Eric
Rees, Rt Hon M. (Leeds S)


Dewar, Donald
Richardson, Ms Jo


Dixon, Donald
Roberts, Ernest (Hackney N)


Dormand, Jack
Robinson, G. (Coventry NW)


Douglas, Dick
Rogers, Allan


Dubs, Alfred
Ross, Stephen (Isle of Wight)


Dunwoody, Hon Mrs G.
Shields, Mrs Elizabeth


Eadie, Alex
Short, Ms Clare (Ladywood)


Eastham, Ken
Skinner, Dennis


Evans, John (St. Helens N)
Smith, Rt Hon J. (M'ds E)


Ewing, Harry
Snape, Peter


Fatchett, Derek
Spearing, Nigel


Faulds, Andrew
Steel, Rt Hon David


Field, Frank (Birkenhead)
Stewart, Rt Hon D. (W Isles)


Fields, T. (L'pool Broad Gn)
Stott, Roger


Fisher, Mark
Strang, Gavin


Flannery, Martin
Thomas, Dafydd (Merioneth)


Foot, Rt Hon Michael
Thompson, J. (Wansbeck)


Foster, Derek
Thorne, Stan (Preston)


Foulkes, George
Tinn, James


Freud, Clement
Wainwright, R.


George, Bruce
Wallace, James


Gilbert, Rt Hon Dr John
Warden, Gareth (Gower)


Godman, Dr Norman
Weetch, Ken


Hamilton, W. W. (Fife Central)
Welsh, Michael


Hancock, Michael
Wigley, Dafydd


Harrison, Rt Hon Walter
Wilson, Gordon


Haynes, Frank
Wrigglesworth, Ian


Hogg, N. (C'nauld &amp; Kilsyth)
Young, David (Bolton SE)


Holland, Stuart (Vauxhall)



Home Robertson, John
Tellers for the Ayes:


Howells, Geraint
Mr. Allen McKay and


Hoyle, Douglas
Mr. James Hamilton.


Hughes, Roy (Newport East)






NOES


Ancram, Michael
Hicks, Robert


Ashby, David
Hind, Kenneth


Aspinwall, Jack
Hogg, Hon Douglas (Gr'th'm)


Atkins, Robert (South Ribble)
Holland, Sir Philip (Gedling)


Atkinson, David (B'm'th E)
Howard, Michael


Baker, Rt Hon K. (Mole Vall'y)
Howarth, Gerald (Cannock)


Batiste, Spencer
Howell, Ralph (Norfolk, N)


Beaumont-Dark, Anthony
Hubbard-Miles, Peter


Best, Keith
Hunt, David (Wirral W)


Bevan, David Gilroy
Hunt, John (Ravensbourne)


Biffen, Rt Hon John
Irving, Charles


Blaker, Rt Hon Sir Peter
Jenkin, Rt Hon Patrick


Boscawen, Hon Robert
Johnson Smith, Sir Geoffrey


Bottomley, Peter
Jones, Gwilym (Cardiff N)


Bottomley, Mrs Virginia
Jones, Robert (Herts W)


Bowden, Gerald (Dulwich)
Kellett-Bowman, Mrs Elaine


Brandon-Bravo, Martin
Kershaw, Sir Anthony


Bright, Graham
Key, Robert


Brinton, Tim
King, Roger (B'ham N'field)


Brown, M. (Bhgg &amp; Cl'thpes)
Knight, Greg (Derby N)


Bruinvels, Peter
Knowles, Michael


Bryan, Sir Paul
Knox, David


Buck, Sir Antony
Latham, Michael


Budgen, Nick
Lawler, Geoffrey


Carlisle, Rt Hon M. (W'ton S)
Lee, John (Pendle)


Cash, William
Leigh, Edward (Gainsbor'gh)


Channon, Rt Hon Paul
Lester, Jim


Chope, Christopher
Lewis, Sir Kenneth (Stamf'd)


Clark, Hon A. (Plym'th S'n)
Lightbown, David


Clark, Sir W. (Croydon S)
Lilley, Peter


Clegg, Sir Walter
Lloyd, Peter (Fareham)


Conway, Derek
Lord, Michael


Coombs, Simon
Lyell, Nicholas


Cope, John
McCrindle, Robert


Couchman, James
MacGregor, Rt Hon John


Cranborne, Viscount
MacKay, Andrew (Berkshire)


Currie, Mrs Edwina
Maclean, David John


Dorrell, Stephen
McLoughlin, Patrick


Douglas-Hamilton, Lord J.
McNair-Wilson, M. (N'bury)


Dunn, Robert
McQuarrie, Albert


Durant, Tony
Major, John


Dykes, Hugh
Malins, Humfrey


Eggar, Tim
Malone, Gerald


Eyre, Sir Reginald
Marlow, Antony


Favell, Anthony
Mates, Michael


Fletcher, Alexander
Mather, Carol


Fookes, Miss Janet
Maxwell-Hyslop, Robin


Forsyth, Michael (Stirling)
Mayhew, Sir Patrick


Forth, Eric
Mellor, David


Fowler, Rt Hon Norman
Merchant, Piers


Fox, Marcus
Meyer, Sir Anthony


Franks, Cecil
Miller, Hal (B'grove)


Fraser, Peter (Angus East)
Mitchell, David (Hants NW)


Freeman, Roger
Moore, Rt Hon John


Fry, Peter
Morrison, Hon P. (Chester)


Gale, Roger
Moynihan, Hon C.


Garel-Jones, Tristan
Neale, Gerrard


Gower, Sir Raymond
Newton, Tony


Greenway, Harry
Norris, Steven


Gregory, Conal
Page, Richard (Herts SW)


Griffiths, Sir Eldon
Patten, Christopher (Bath)


Griffiths, Peter (Portsm'th N)
Pawsey, James


Ground, Patrick
Peacock, Mrs Elizabeth


Grylls, Michael
Pollock, Alexander


Gummer, Rt Hon John S
Porter, Barry


Hamilton, Neil (Tatton)
Portillo, Michael


Hanley, Jeremy
Powell, William (Corby)


Hannam, John
Powley, John


Hargreaves, Kenneth
Prentice, Rt Hon Reg


Harris, David
Price, Sir David


Haselhurst, Alan
Proctor, K. Harvey


Hawkins, C. (High Peak)
Raison, Rt Hon Timothy


Hawksley, Warren
Rathbone, Tim


Hayes, J.
Renton, Tim


Hayward, Robert
Rhodes James, Robert


Heathcoat-Amory, David
Rhys Williams, Sir Brandon


Heddle, John
Ridsdale, Sir Julian


Henderson, Barry
Rifkind, Rt Hon Malcolm


Hickmet, Richard
Roberts, Wyn (Conwy)






Robinson, Mark (N'port W)
Thornton, Malcolm


Ryder, Richard
Thurnham, Peter


Sackville, Hon Thomas
Townend, John (Bridlington)


Sainsbury, Hon Timothy
Tracey, Richard


Sayeed, Jonathan
Trippier, David


Shaw, Sir Michael (Scarb')
Twinn, Dr Ian


Shelton, William (Streatham)
van Straubenzee, Sir W.


Shepherd, Colin (Hereford)
Wakeham, Rt Hon John


Shersby, Michael
Wall, Sir Patrick


Silvester, Fred
Waller, Gary


Sims, Roger
Wardle, C. (Bexhiil)


Skeet, Sir Trevor
Watson, John


Smith, Tim (Beaconsfield)
Watts, John


Spencer, Derek
Wells, Bowen (Hertford)


Spicer, Jim (Dorset W)
Wells, Sir John (Maidstone)


Stanbrook, Ivor
Wheeler, John


Steen, Anthony
Whitfield, John


Stern, Michael
Winterton, Nicholas


Stevens, Lewis (Nuneaton)
Wolfson, Mark


Stewart, Andrew (Sherwood)
Wood, Timothy


Stewart, Ian (Hertf'dshire N)
Woodcock, Michael


Stradling Thomas, Sir John
Yeo, Tim


Sumberg, David
Young, Sir George (Acton)


Taylor, Teddy (S'end E)



Temple-Morris, Peter
Tellers for the Noes:


Thomas, Rt Hon Peter
Mr. Archie Hamilton and


Thompson, Donald (Calder V)
Mr. Mark Lennox-Boyd.


Thompson, Patrick (N'ich N)

Question accordingly agreed to.

Clause read a Second time, and added to the Bill.

New Clause 17

TRANSFERS OF BUSINESS: SUPPLEMENTARY PROVISIONS

' . — (1) Part 1 of Schedule (Transfers of business: supplementary provisions) to this Act shall have effect for imposing on a building society proposing to transfer its business to a company an obligation to issue statements to its members relating to the proposed transfer.

(2) Where application is made to the Commission for confirmation of a transfer of business to a company it shall, except as provided in subsections (3) to (5) below, confirm the transfer; and Part II of that Schedule shall have effect with respect to the procedure on an application for such confirmation.

(3) Subject to subsection (4) below, the Commission shall not confirm a transfer of business if it considers that—

(a) some information material to the members' decision about the transfer was not made available to all the members elegible to vote; or
(b) the vote on any resolution approving the transfer does not represent the views of the members eligible to vote; or
(c) there is a substantial risk that the successor will not become or, as the case may be, remain a recognised bank or licensed institution for the purposes of the Banking Act 1979; or
(d) some relevant requirement of this Act or the rules of the society was not fulfilled.

(4) The Commission shall not be precluded from confirming a transfer of business by virtue only of the non-fulfilment of some relevant requirement of this Act or the rules of the society if it appears to the Commission that it could not have been material to the members' decision about the transfer and the Commission gives a direction that the failure is to be disregarded for the purposes of this section.

(5) Where the Commission would be precluded from confirming a transfer of business by reason of any of the defects specified in paragraphs (a), (b), (c) and (d) of subsection (3) above, it may direct the society making the transfer—

(a) to take such steps to remedy the defect or defects as it specifies in the direction; and
(b) to furnish the Commission with evidence satisfying it that it has done so;

and, if the Commission is satisfied that the steps have been taken and the defect or defects has or have been substantially remedied, the Commission shall confirm the transfer; but, if it is not so satisfied, it shall refuse its confirmation.

(6) The steps that a society may be required under subsection (5)(a) above to take include the calling of a further meeting, securing the variation of the transfer agreement or securing the alteration of the approved protective provisions of the articles of association of its successor.

(7) A failure to comply with a relevant requirement of this Act or the rules of a building society shall not invalidate a transfer of the business of the society; but, if a society fails without reasonable excuse to comply with such a requirement, the society shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale and so shall any officer who is also guilty of the offence.

(8) In this section "relevant requirement", with reference to this Act or the rules of a society, means a requirement of the applicable provisions of this Act or of any rules prescribing the procedure to be followed by the society in approving the transfer and its terms.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 18

REGULATED TERMS: COMPENSATION FOR LOSS OF OFFICE, ETC.

'(1) Subject to subsections (2) and (3) below, the terms of a transfer of business by a building society to the company which is to be its successor may include provision for compensation to be paid by the society or the company to or in respect of any director or other officer of the society for loss of office or diminution of emoluments attributable to the transfer.

(2) Any such provision must be authorised so far as the society is concerned as follows, that is to say—

(a) except in so far as paragraph (b) below applies, the provision must be approved by a resolution passed as a special resolution, not being one of the requisite transfer resolutions;
(b) if regulations are made under subsection (3) below authorising payments of such compensation within prescribed limits and the provision for such compensation includes only payments of amounts not exceeding the prescribed limits, the passing of the requisite transfer resolutions is sufficient authority for their payment.

(3) The Commission, with the consent of the Treasury, may by regulations authorise payments of compensation to directors or other officers attributable to transfers of business under section (Transfer of business to commercial company) subject to limits specified in or determinable under the regulations and the regulations may make different provision for different classes of person.

(4) Nothing in subsections (2) or (3) above prevents a director or other officer from receiving payments which, in the aggregate, exceed any limit applicable to him under either of those subsections if the excess payment is included in provision approved as required by subsection (2)(a) above; but if any payment is received which has not been authorised under paragraph (a) or (b) of that subsection it shall be repaid.

(5) The power to make regulations under subsection (3) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(6) In this section—
compensation" includes the provision of benefits in kind;
loss of office" includes, in relation to a director or other officer of a building society holding office in a subsidiary of that society or in an associated body by virtue of his position in that society, the loss of that office; and
prescribed", with reference to limits on compensation, means prescribed by regulations under subsection (3) above;
and any terms of a transfer of business to which subsection (2) or regulations under subsection (3) above apply are regulated terms for the purposes of section (Transfer of business to commercial company).'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 19

REGULATED TERMS ETC: DISTRIBUTIONS AND SHARE RIGHTS

'(1) Subject to subsections (2) to (8) below, the terms of a transfer of business by a building society to the company which is to be its successor may include provision for part of the funds of the society or its successor to be distributed among, or other rights in relation to shares in the successor conferred on, members of the society, in consideration of the transfer.

(2) The terms of a transfer of a society's business must—

(a) require its successor to assume as from the vesting date a liability to every qualifying member of the society as in respect of a deposit made with the successor corresponding in amount to the value of the qualifying shares held by him in the society; and
(b) confer a right, subject to subsection (7) below, to a distribution of funds, whether of the society or its


successor, by way of bonus on every qualifying member of the society equal to the relevant proportion of the value of the qualifying shares held by him in the society; and
(c) in a case where the successor is a specially formed company, confer a right on every qualifying member of the society to a priority liquidation distribution by its successor calculated in the prescribed manner so as to represent the extent of his deposit under paragraph (a) above and secured on the property or undertaking of the successor.

(3) For the purposes of the liabilities assumed under subsection (2)(a) above by the society's successor, a member is a qualifying member if he held shares in the society on the day immediately preceding the vesting date and his qualifying shares are those held by him on that day.

(4) For the purposes of the rights conferred under subsection (2)(b) above on members of the society, a member is a qualifying member if he held shares in the society on the qualifying day and was not eligible to vote on the requisite transfer resolution, his qualifying shares are those held by him on that day and the relevant proportion is the proportion which (as shown in the latest balance sheet of the society) the society's total liability to its members in respect of shares bears to its reserves.

(5) For the purposes of the rights conferred under subsection (2)(c) above on former members of the society, a member is a qualifying member if he held shares in the society on the qualifying day, was eligible to vote on the requisite resolution and is a depositor with its successor.

(6) For the purposes of subsection (2)(c) above,—

(a) a right to a liquidation distribution by a society's successor is a right to a distribution of its assets in the event of its being wound up;
(b) the right shall confer priority in the distribution of the assets over all other creditors and members of the company other than those creditors the debts to whom are preferential debts for the purposes of the Insolvency Act 1985; and
(c) "prescribed" means prescribed by transfer regulations.

(7) The Commission may, where it confirms a transfer of a society's business to an existing company, as it thinks fit having regard to what is equitable between the members of the society, direct that no bonus distribution of funds in pursuance of subsection (2)(b) above shall be made or that the amount distributed shall he such lesser amount as it provides for in the direction; and where the Commission gives a direction under this subsection no liability to make such a distribution shall arise or, as the case may be, that liability shall be discharged by payment of the lesser amount.

(8) The following restrictions apply to any distribution of funds, or any conferring of rights in relation to shares, in connection with the transfer of its business from the society to its successor where the successor is a company specially formed by the society, that is to say—

(a) no distribution shall be made except that required by subsection (2)(b) above;
(b) where a distribution of funds is made to members of the society or rights are conferred on them to acquire shares in priority to other subscribers, the distribution shall be made to, or the right conferred on, those members who held shares in the society throughout the period of two years which expired with the qualifying day, and no others; and
(c) where negotiable instruments acknowledging rights to shares are issued by the successor within the period of two years beginning with the vesting date, no such instruments shall be issued to former members of the society unless they are also issued, and on the same terms, to all other members of the company;

and it is unlawful for any distribution of funds to be made or right in relation to shares conferred in contravention of the provisions of this subsection.

(9) Where the successor is a specially formed company, the terms of the transfer must include provision to secure that the society ceases to hold any shares in the successor by the date on which the society is to dissolve.

(10) Any terms of a transfer of business to which subsection (2), (8) or (9) above apply are regulated terms for the purposes of section (Transfer of business to commercial company).

(11) In subsections (4), (5) and (8) above, "qualifying day" means the day specified in the transfer agreement as the qualifying day for the purposes of this subsection.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 20

PROTECTIVE PROVISIONS FOR SPECIALLY FORMED SUCCESSORS

'(1) No company specially formed by a building society to be its successor shall, at any time during the protective period,—

(a) offer to the public, or allot or agree to allot with a view to their being offered for sale to the public, any shares in or debentures of the company, or
(b) allot or agree to allot any share in or debenture of the company, or
(c) register a transfer of shares in or debentures of the company,

if the effect of the offer, the allotment or the registration of the transfer would be that more shares or debentures than the permitted proportion would be held by, or by nominees for, any one person (other than the society).

(2) The articles of association of the company shall include provision such as will secure that the company does not offer the public, allot or register transfers of, shares or debentures in contravention of subsection (1) above and no alteration in those provisions may be made by the company during the protective period.

(3) Any provision (including any altered provision) of the company's articles of association which is to any extent inconsistent with subsection (1) above shall, to that extent, be void; and any allotment or registration of a transfer of shares or debentures in contravention of that subsection shall be void.

(4) The Bank of England, if it considers it desirable in the interests of the depositors and potential depositors of a successor to do so, may direct by notice to the successor that this section shall cease to apply to the successor.

(5) In subsections (1) to (3) above—
the permitted proportion", in relation to shares in or debentures of the company, is 15 per cent. of, in the case of shares, the company's issued share capital and, in the case of debentures, the total indebtedness of the company on its debentures, as the case may be:
the protective period" is the period beginning with the date of the company's incorporation and ending five years after the vesting date; and
transfer", in relation to shares or debentures does not include a transfer to a person to whom the right to any shares or debentures has been transmitted by operation of law;

and any expression used in those subsections and in the Companies Act 1985 or, as regards Northern Ireland, the Companies Act (Northern Ireland) 1960 has the same meaning in those subsections as in that Act.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 21

TRANSFER REGULATIONS

' .—(1) The Commission, with the consent of the Treasury, may by transfer regulations under this section, make provision regulating transfers of business under section (Transfer of business to commercial company).

(2) Transfer regulations may, in particular—

(a) make provision for and in connection with the transition from regulation by and under this Act to regulation by and under the Companies Act 1985 and the Banking Act 1979;
(b) make provision for the treatment, in the hands of companies taking such transfers, of the property, rights and liabilities transferred and for the modification of any enactment in its application to property, rights and liabilities so transferred;


(c) make provision for the purposes of and incidental to section (Regulated terms etc: distribution and share rights) and section (Protective provisions for specially formed successors).

(3) The power to make transfer regulations is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(4) Any terms of a transfer of business to which transfer regulations apply are regulated terms for the purposes of section (Transfer of business to commercial company).'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 22

CANCELLATION OF REGISTRATION

'(1) Where the central office is satisfied, with respect to a building society—

(a) that the Society has been dissolved by virtue of section 82(5), 83(10) or (Transfer of business to commercial company) (8), or
(b) that the society has been wound up under the company insolvency laws and dissolved,

the central office shall cancel the registration of the society.

(2) Where the central office is satisfied, with respect to a building society—

(a) that a certificate of incorporation has been obtained for the society by fraud or mistake and that the society is not an authorised society, or
(b) that the society has ceased to exist,

the central office may cancel the registration of the society.

(3) Without prejudice to subsection (2) above, the central office may, if it thinks fit, cancel the registration of a building society at the request of the society, evidenced in such manner as the central office may direct.

(4) Before cancelling the registration of a building society under subsection (2) above, the central office shall give to the society not less than two months' previous notice, specifying briefly the grounds of the proposed cancellation.

(5) Where the registration of a building society is cancelled under subsection (2) above, the society may appeal to—

(a) the High Court, where the principal office of the society is situated in England and Wales or in Northern Ireland, or
(b) the Court of Session, where that office is situated in Scotland,

and on any such appeal the High Court or the Court of Session, as the case may be, if it thinks just to do so, may set aside the cancellation.

(6) Where the registration of a building society is cancelled under subsection (2) or (3) above, then subject to the right of appeal conferred by subsection (5) above, the society, so far as it continues to exist, shall cease to be a society incorporated under this Act (and accordingly shall cease to be a building society within the meaning of this Act).

(7) Subsection (6) above shall have effect in relation to a building society without prejudice to any liability actually incurred by the society; and any such liability may be enforced against the society as if the cancellation had not take place.

(8) Any cancellation of the registration of a building society under this section shall be effected in writing signed by the central office.

(9) As soon as practicable after the cancellation of the registration of a society under his section the central office shall cause notice thereof to be published in the London Gazette, the Edinburgh Gazette or the Belfast Gazette according to the situation of the society's principal office, and if it thinks fit, in one or more newspapers.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 23

LOANS FOR MOBILE HOMES (NO. 2)

' .—(1) Subject to the provisions of this section, a building society may make mobile home loans to individuals, whether or not they are members of the society.

(2) A mobile home loan is a loan secured by a mortgage of a mobile home, with or without other security.

(3) No such loan shall be made unless the building society, when it makes the loan, is satisfied that—

(a) the borrower or a dependant of his of a prescribed description is or will be entitled under an agreement to which the Mobile Homes Act 1983 applies to station the mobile home on land forming part of a protected site;
(b) the mobile home is for the residential use of the borrower or a dependant of his of a prescribed description;
(c) the amount lent will not exceed the amount likely to be realised on a sale of the mobile home on the open market; and
(d) subject to subsection (4) below, no other mortgage of the mobile home which is to secure the loan is outstanding in favour of a person other than the society.

(4) The requirement in subsection (3)(d) above shall be treated as satisfied if the loan is made on terms that the other loan is redeemed or postponed to it.

(5) A building society shall not make a mobile home loan to an individual if the principal exceeds—

(a) the limit for the time being imposed by or under subsection (6) below; or
(b) the balance remaining after deducting from that limit the aggregate of any other sums outstanding in respect of loans made under this section or section 14 by the society to that individual;

and if two or more loans under this section or this section and section 14 are made simultaneously by the society to the same individual they shall be treated for the purposes if this subsection as a single loan of an amount equal to the aggregate of the principal of each of those loans.

(6) The limit on loans to any one individual under this section is £10,000 or such other sum as the Commission may, with the consent of the Treasury, specify by order in a statutory instrument.

(7) Loans under this section constitute class 3 assets for the purposes of the requirements of this Part for the structure of commercial assets and accordingly the aggregate of the amounts outstanding in respect of—

(a) the principal of loans under this section,
(b) the interest on those loans, and
(c) any other sums which borrowers are obliged to pay the society under the terms of those loans,

counts in accordance with section 18 towards the limits applicable to class 3 assets under that section.

(8) The power conferred by this section is not available to a building society which does not for the time being have a qualifying asset holding, but the cessation of its availability does not require the disposal of any property or rights.

(9) The power conferred by this section on a building society, if available to it, must in order to be exercisable, be adopted by the society.

(10) An instrument containing an order under subsection (6) above shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(11) In this section—
mobile home" has the same meaning as "caravan" in Part I of the Caravan Sites and Control of Development Act 1960;
prescribed", in relation to descriptions of dependants of borrowers, means such as are for the time being prescribed in an order under section 12(1) as respects class 1 advances; and
protected site" has the same meaning as in the Mobile Homes Act 1983.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 24

COSTS, PROCEDURE AND EVIDENCE (No. 2)

' .—(1) A tribunal may give such directions as it thinks fit for the payment of costs or expenses by any party to the appeal.

(2) On an appeal under section (Rights of appeal) (2) the building society in relation to which the determination was made, or upon which the requirement was imposed, shall be entitled to be heard.

(3) The Treasury may, after consultation with the Council on Tribunals, make regulations with respect to appeals under section (Rights of appeal); and those regulations may in particular make provision—

(a) as to the period within which and the manner in which such appeals are to be brought;
(b) as to the manner in which such appeals are to be conducted, including provision for any hearing to be held in private;
(c) for requiring any person, on tender of the necessary expenses of his attendance, to attend and give evidence or produce documents in his custody or under his control;
(d) for enabling an appellant to withdraw an appeal or the Commission to withdraw its opposition to an appeal and for the consequences of any such withdrawal;
(e) for taxing or otherwise settling any costs or expenses directed to be paid by the tribunal and for the enforcement of any such direction;
(f) for enabling any functions in relation to an appeal to be discharged by the chairman of the tribunal; and
(g) as to any other matter connected with such appeals.

(4) A person who, having been required in accordance with regulations under this section to attend and give evidence, fails without reasonable excuse to attend or give evidence shall be liable on summary conviction to a fine not exceeding level 5 on the standard scale.

(5) A person who intentionally alters, suppresses, conceals, destroys or refuses to produce any document which he has been required to produce in accordance with regulations under this section, or which he is liable to be so required to produce, shall be liable—

(a) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or both;
(b) on summary conviction, to a fine not exceeding the statutory maximum.

(6) The power to make regulations under this section is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Ian Stewart.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 25

LIMITED POWER TO ANTICIPATE FUTURE STATUTORY INSTRUMENT POWERS

'(1) This section has effect as regards any power conferred under ay provision of this Act on building societies or building societies of any description by—

(a) an instrument a draft of which has to be approved by a resolution of each House of Parliament before it can be made, or
(b) an instrument which is subject to annulment in pursuance of a resolution of either House of Parliament and which defers its operation until a future date;

and in this section "the anticipation date" is, in the case of an instrument falling within paragraph (a), the date on which either House approves the draft and, in the case of an instrument falling within paragraph (b), the date on which it was laid before Parliament.

(2) Every building society or, as the case may be, every building society of the description to which the instrument applies, has, as from the anticipation date, power, for the purposes of the power conferred by the instrument, to do such things, subject to subsection (3) below, as are reasonably necessary to enable it—


(a) to decide whether or not, and to what extent, to exercise (and in the case of an adoptable power to adopt) the power, and
(b) if it decides to exercise the power, to exercise it as from the date when it becomes exercisable by the society.

(3) Subsection (2)(b) above does not authorise a society—

(a) to make contracts, other than conditional contracts, for the acquisition of land, the acquisition of a business or the acquisition of shares in any company if that company offers the public any service or facility within the power,
(b) to issue invitations to members of the society or the public to apply for arty power to be exercised for their benefit, or
(c) to retain shares in a company which offers the public any service or facility within the power;

and, in this subsection, "conditional", in relation to contracts with respect to the exercise of a power, means conditional on the power's becoming exercisable by the society.

(4) The power conferred by this paragraph, and activities carried on under it, for the purposes of an adoptable power are not be treated as included in, or in activities comprised in, that adoptable power for the purposes of paragraph 15 of Schedule 2 to this Act.'.—[Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this it will be convenient to take Government amendments Nos. 383 and 384.

Mr. Stewart: At the risk of tempting providence, I shall say that I hope and believe that this is a less contentious new clause than the one that we have just debated.
The new clause and the related amendments are designed to make it clear that building societies are permitted to undertake preparatory work for the implementation of powers proposed under the Bill, since it received its Second Reading, and under subsequent statutory instruments with a comparable but more limited power of anticipation. Because of the way in which the vires of building societies are defined, I am advised that it is necessary to include a specific provision of this sort in the Bill.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New Clause 1

EMPLOYEES REPRESENTATIVE

'Where a building society has more than fifty employees, one of the directors shall be an employee nominated as a respresentative of employees ("employees" representative) in accordance with the society's rules and to which Section 54 does not apply. The rules of the society may impose conditions for the re-election of the employees representative, reasons for disqualification and requisite nomination procedures. The Commission may make such transitional provisions as it considers expedient.'.—[Mr. Weetch.]

Brought up, and read the First time.

Mr. Weetch: I beg to move, That the clause be read a Second time.
The text and scope of this clause make its aims and intentions clear and straightfoward. I hope that the broad aims of the clause will be supported by the House.
The clause makes provision for at least one director on the board of directors to be elected by the employees of a building society, provided that society has more than 50 employees. We are talking about the principle of employee directors.
Once that principle is grasped, the rest is administrative apparatus. Thus the new clause makes separate provision for this to be done outside clause 34 which lays down the main framework for elections to boards of directors.
I should like to come to the brass tacks of the case. On many occasions hon. Members have paid tribute to the success of building societies in the cause of owner occupation and in terms of service to the public. I am certain that the Opposition will be supported by hon. Members in all parts of the House. A great deal of the success of building societies is due to the dedicated, efficient and conscientious service that their employees give to the public. Such service is to be found from the counter staff to the most senior levels of management.
The skills and enormous experience of the people who work for the building societies would be invaluable in making the societies' services more available to the public. These are the people who do the day-to-day work and take the day-to-day decisions. They come face to face with the public every day, and they have a feeling for the local communities that they serve. It would be quite in character for building societies to be warmly receptive to the basic idea of this new clause.
Building societies grew up as part of the self-help movement in Britain, and they still adhere to that principle. They are still described as mutual institutions. There was a great deal of reassurance in Committee that the building society movement, although there are changes taking place, still remains firmly part of the mutal framework of Britain. There could be no better demonstration of mutuality than the acceptance of the principle that employees should be elected to and serve the boards of directors of building societies.
It has been said that building societies are entering a rougher and more competitive world. That is certainly true. But one thing is even more certain: that when the changes come the employees of building societies will be the first to take the flak. The new clause will enable employees to face those changes with a great deal more confidence. If takeovers occur and if opposed mergers are successful, there will be redundancies and unemployment, and those things will take place in the name of rationalisation. There will be difficulties, but if employees are directly represented on boards of directors they will be more confident in being able to face those problems and protect themselves. The best way to do that is to ensure that they have a say in strategic and policy decisions at director level.
I move the new clause with some optimism but rather doubtful experience, because when I moved a similar clause on the Trustee Savings Bank Bill some years ago I lost. I hope for better luck this time. The case for the clause is strong. As I have said, building societies are mutual institutions, and I am seeking to establish a democratic and mutual principle. I have read briefs advancing the argument that there is no demand for employee participation at director level. The argument is that, because there is no demand, we ought not to do anything about it. If everything had to be created by demand, few political speeches would ever be made. The argument about demand is not one that politicians can accept.
The idea of employee directors is good in principle, and I hope that the Government will accept it. The Opposition

will certainly go into the Lobby in support of the clause because changes of this kind are long overdue, especially in mutual institutions. The staff of building societies have a fundamental interest in the future of their societies, and that should be recognised in the legislation. New clause 1 goes a substantial part of the way towards bringing that about. It is said that if building society employees are elected to boards of directors they will inevitably take a sectional view of the business of building societies. My answer to that is that building society employees, with their record of service to the public, are just as capable as anyone else of taking a broad rather than a sectional view.
There is great strength in this clause. I hope that the House will accept it.

Mr. Stephen Ross: I support what has been so ably said by the hon. Member for Ipswich (Mr. Weetch). I am glad that the Government are paying much more attention to worker participation, profit sharing and employee share ownership. Surely the natural response to the new clause should be to accept it and agree that in future building societies should make provision for an employee director where the society directly employs more than 50 people. The arguments for that have already been advanced. We discussed it briefly in Committee, although we did not make much progress. I hope that today this proposal will be accepted, and that some thought has been given to it in the interim.
A great change is coming to all building society operations, especially housing financing. Professions, of one of which I am proud to be a member, will have to take a rather different role. Much more commerce will be involved in professions such as chartered surveying and the law. There will be greater competition. Banks and building societies will vie with one another. Building societies can now set up commercial institutions and businesses.
I entirely agree with the hon. Member for Ipswich that the employees of building societies, which may get very big—we shall have much bigger ones yet and probably very few of them—should have a firm stake in their company, with a director on the board. I hope that we shall have a positive response to the new clause. The time for such a move has long since passed.

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Mr. Austin Mitchell: The arguments have been extremely well and ably made by my hon. Friend the Member for Ipswich (Mr. Weetch), who has taken a close and active interest in the Bill and in the principle of worker representation on the board. I remember the discussions on the Trustee Savings Banks Bill, which he mentioned.
It is important to put the principle into legislation. It is good to see the Government coming round to accepting some of the principles that we have argued for consistently, such as the ombudsman, which they have now accepted. I hope that this is another. It is right that there should be representation. Employees should have a channel of influence and the feeling of involvement that comes from it. They should be able to influence the organisation their way and advance their views. A legacy such as this has been conferred on much of West German industry, and it has worked extremely well. The form is peculiarly appropriate to building societies.
As my hon. Friend the Member for Ipswich said, the new clause would extend the principle of mutuality. There


has been a dramatic change in the nature of building societies from the small, intimate, almost paternalistic locally-based organisations at the beginning of the 1960s. There has been an enormous increase in the number of branches, but a rapid shrinkage in the number of building societies. Societies are now much bigger and employ far more people. There are problems of impersonality, remoteness and lack of contact which simply did not exist a couple of decades ago. In view of that change, we should provide the principle of employee representation in legislation. I should like it to be done voluntarily, but that has not happened.
As building societies are becoming much larger financial institutions, employing large numbers of people, we should provide, through legislation, a channel which will ultimately be accepted enthusiastically. I hope that the Government will accommodate themselves to the arguments. It would be rather a shame if the Minister merely played a straight bat, which the smile lingering around his face shows he might be intending to play. I hope that he will accept the force of the arguments— building society employees do.

Sir George Young: I have quickly removed the smile from my face, as I must advise the House not to accept the new clause. It is not that we have anything against the principle of employee involvement. We favour it and have taken several steps to encourage it, but I see no logic in applying the obligation just to building societies and not to companies and other organisations, and I am not convinced that the best way in which to promote employee involvement is to impose statutory obligations such as are suggested.
The hon. Member for Ipswich (Mr. Weetch) rightly said that one of the strengths of the building society movement is its staff. They have strong roots in the local community and are popular. They have achieved that status without the benefit of the new clause. I did not follow the hon. Gentleman's logic which led him to believe that we must now impose a statutory obligation on building societies if that high reputation and commitment are to be maintained.
We have heard no explanation of why such a requirement should be put on building societies but not on companies generally. If we make such provision, it should apply equally across the corporate sector. It is illogical to single out the building societies.

Mr. Austin Mitchell: The Minister has accepted exactly this principle in regard to the ombudsman. We did not make that clause extend to every other organisation. Why cannot the logic of that principle be applied here?

Sir George Young: There are ombudsman arrangements for other services. One of the reasons why we introduced an ombudsman service in the Bill was the feeling on both sides of the Committee that there should be a statutory ombudsman service. Such provision is unnecessary in other sectors, as there is already a voluntary service. If other parts of the private sector want to implement the ombudsman principle, the Government would be delighted and would not stand in the way of that being done. We do not accept, however, that the nature of building societies is so different from the rest of the corporate sector that we must single them out and impose on them a statutory obligation of an employee director.

Mr. Michael Latham: My hon. Friend knows that I am a vice-president of the Building Societies Association. Can he confirm that there is another matter that ought to be considered? Not everybody accepts that the best way for the interests of employees to be considered is for one of them to be on the hoard of directors. The idea is not accepted unanimously by the trades union movement, for example.

Sir George Young: Indeed. As I said earlier, there are two objections. The first is the somewhat narrow one that there is no reason to single out the building societies, and the second, more general one is whether, if one believes in employee involvement—which the Government do— this is the right way in which to proceed. Provisions consolidated in schedule 7 to the Companies Act 1985 require companies with more than 250 employees to report annually on the development of their arrangements for providing regular information to employees, for consulting them and for involving them in the company's affairs. Parallel provisions for building societies could be introduced by the commission's regulation-making powers. I am aware that the present chief registrar, as first commissioner, intends to recommend to the commission that similar provision should be made. Parity of treatment in that way seems entirely desirable.
The Government do not believe that imposing statutory obligations on organisations to have employee representatives is the right way forward. As my hon. Friend the Member for Rutland and Melton (Mr. Latham) said, some trade union representatives do not believe that that is the best way in which to proceed. Employees and employers should work out between them arrangements which suit them best. We want to encourage that type of co-operation rather than impose a rigid statutory obligation which may not be appropriate.
Building society employees can always put themselves up for election to the board. A retired employee of the Abbey National got himself elected to the society's board at its annual general meeting earlier this year. That is a perfectly legitimate avenue, which is open to building society employees, to secure representation on the board. The policy of encouragement will be applied as much to societies as to companies—the reporting requirement is evidence of that. For the reasons that I have given, the Government cannot support the case for the new clause.

Mr. Weetch: I am completely unconvinced by the Minister's reply. Although I am saddened by his answer, I am not especially surprised by it. We are meeting the same stone wall on the Floor of the House as we met in Committee.
The Opposition are not singling out building societies in this respect. By adopting this approach we did not intend to saddle all other corporate organisations with the same obligations. When I put this case, I tried to argue that building societies purport to be mutual institutions and that one of the definitions of a mutual institution is that the affairs of the society are under the control of its members at all times. We believe that new clause 1 is the most effective way to bring that to pass.
We hope that the principle of industrial democracy, which we recommend in the clause, will become more widespread as the years pass. We believe that the building societies are a good place in which to make a start to achieve that industrial democracy.

Question put, That the clause be read a Second time:—

Question accordingly negatived.

New Clause 2

CODE OF PRACTICE

'(1) The Commission shall, after consultation with the Lord Chancellor and the Director-General of Fair Trading, prepare, publish and administer a code of practice with regard to the provision by building societies of conveyancing services.

(2) The code of practice referred to in subsection (1) shall (inter alia) make provision for the manner in which and the standards to which conveyancing services shall be provided by building societies and shall in particular make provision for protecting persons for whom conveyancing services are provided by building societies from conflicts of interest that might otherwise arise in connection with the provision of such services.

(3) Notwithstanding any practice rule made by the Council of the Law Society under section 31 of the Solicitors Act 1974, a building society operating in accordance with the code of practice referred to in subsection (1) above may, subject to such terms and conditions as the Commission may state, provide conveyancing services generally, including the provision of such services to persons to whom advances are made under section 10 of this Act.

(4) A building society not operating in accordance with the code of practice referred to in subsection (1) above may provide conveyancing services, but only to persons other than those to whom advances are made under section 10 of this Act.'.—[Mr. Weetch.]

Brought up, and read the First time.

Mr. Weetch: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to take Government amendments Nos. 409 to 412.

Mr. Weetch: It is nice to see the Solicitor-General in his place. We have crossed swords on this matter before. There was a cold wind of conflict in Committee, but with the new clause I seek to bring a warm breeze of conciliation in an attempt to find a way through some of the difficulties. I hope that when the Solicitor-General replies in the euphemistic prose of the Law Officers he will express some sympathy for what we have to say.
One of the great issues of contention in the Bill has been whether building societies should be able to offer

conveyancing services to borrowers. To put it simply, is it safe to obtain a mortgage and a conveyancing service from the same society? The main lines of argument have been debated a number of times both in the Chamber and in Committee. I do not intend to cover the ground in detail again, as the main lines of the disagreement are well marked out.
It remains our view that it is in the consumer's interest that building societies should be able to offer conveyancing services to borrowers. That is the principle of the argument and it is supported by the Consumers Association, the National Consumer Council and the Building Societies Association. In a Consumers Association survey in 1984, 81 per cent. of those interviewed said that they would be pleased to have building societies offering conveyancing services. Many thousands of owner-occupiers throughout the country would like to benefit from such services. It is not a matter of whether the Government or the Opposition want it. The consumer wants it. From the point of view of a consumer or free market society, the consumer is king, and if he or she wants the service that should be the deciding argument.
I will lay out briefly the basic framework of the case. First, there is considerable consumer demand for such a service. Many owner-occupiers would welcome a conveyancing service as part of a one-stop shopping package for housing services.
Secondly, there would be more freedom of choice for the consumer. That argument should appeal directly to the Government. At present, the consumer can choose an independent firm of solicitors. Shortly, he will be able to choose a firm of licensed conveyancers. The choice would be widened considerably if the consumer could use the same people through the medium of his building society.
Thirdly, such a change could lead to lower costs. The conveyancing industry in this country has long resembled the putting out system in the 18th century. Year after year, thousands of documents asking ritual questions are shuffled out from small workshops and thousands of other workshops return the same documents with ritual answers. Building societies offer scope for change with economies of scale and a large throughput of conveyances and mortgages with beneficial effects in terms of lower costs.
The main argument against the proposition has been that conflicts of interests will arise if the recipients of mortgage finance wish to use building society conveyancing services. I accept entirely that conflicts of interest may arise, but it is a quite different matter to suggest that they cannot be resolved, and we contest that argument at every stage.
The new clause seeks to provide yet another guarantee against any possible mal-effects of the very occasional conflicts of interest that may arise. Under clause 33(1) a building society is expressly forbidden to make the use of any conveyancing or other service obligatory because the consumer is in receipt of mortgage finance. Unfair pressure of that kind will be illegal, and the consumer will be totally free to go elsewhere if he or she wishes. That is the ultimate protection in a free market. If one does riot want the service, one goes elsewhere. That-should be good enough for any of us.
Moreover, the building societies will largely be using solicitors who have an established code of ethics and professional practice to deal with possible conflicts of interest. We are dealing not with fly-by-nights but with


professional people who have accepted practices which are ethical. If conflicts of interests arise, therefore, we look to the professional standards of those involved to find ways out of the difficulty. As I understand it, the Law Officers Department says that that is not the position. We beg to differ and we are putting forward a code of practice as a constructive way out of the difficulty.
I point out to the Solicitor-General that in the critical area of the mortgage deed and the terms of finance for the borrower, the same solicitor may already act for the building society and for the borrower in millions of transactions every year, and very few conflicts of interest arise.
7.30 pm
At the end of the day it is an argument not about conflicts of interest but about which organisation is to take the biggest share of the conveyancing market when it is opened up to free competition. The legal profession is trying to protect an established service which has always borne heavily on the owner-occupier.
To explain the basic principle of the clause, we are bending over backwards to meet every objection from the Lord Chancellor's Department. If the proposed code of practice is not right, we shall invite the Lord Chancellor to frame another. We cannot do more than that. The Solicitor-General may argue that it is impossible to frame any code of practice that would resolve conflicts of interest but we bee to differ. Conflicts of interest can be resolved.

Mr. Christopher Hawkins: The problem is that there is an inherent conflict of interest if somebody operates for a building society and also for the customer. In the code of practice it would be necessary to say that a solicitor, if he felt that there was a conflict of interest, should refuse to act for both parties. There could be a conflict of interest. Most of us believe that almost all societies are good and fair. But let us suppose that a society put some nasty clauses in its mortgage contract. Would a solicitor tell every customer about that? Would that society employ a solicitor who would tell customers about those nasty clauses? There would need to be a code of practice not for the solicitor but in regard to the mortgage contract. If we could get a sensible mortgage contract which we knew was decent, fair and above board, without onerous resettlement clauses and so on, we could say that that had got rid of the most important conflict of interest because the solicitor would no longer need to comment on the mortgage contract. That is the real conflict. I do not know how the hon. Gentleman's new clause would solve it.

Mr. Weetch: I am grateful for the intervention, because it throws into sharp relief some of the issues that have to be debated. In the latter part of his remarks the hon. Gentleman may have pointed one way forward by proposing certain structural changes. Conflicts of interest do and will arise. Is there a way round them? The main consumer organisations think that there is, and they have put forward suggestions to the Lord Chancellor's Department. Perhaps we shall hear from the Solicitor-General about the to-ing and fro-ing that has been taking place. Consumer organisations and many members of the legal profession are confident that the conflict can be resolved.
The new clause provides for discussions with the Lord Chancellor's Department about what should go into the

code of practice in an attempt to find a way out of the difficulties. The Solicitor-General should accept that it shall not be illegal for a building society to offer conveyancing services to a recipient of mortgage finance.
The number of conflicts of interest will be very small, and it should not be beyond the wit of hon. Members to find a way out of the difficulties. Therefore, the new clause is put forward in the constructive hope that the Government will consider the whole point and say that in principle we are right, but they will think about the detail and bring forward a solution at a later stage.

Mr. Austin Mitchell: I speak with a feeling of resignation, because we have been over the ground so many times. The arguments that we have put forward are accurate. I do not want them to be devalued by repetition, but they have to be put forward.
In attempting to stop a building society from doing conveyancing for people who are getting a mortgage from it. the Government are betraying the promises that were held out to me. It is being done on a specious pretext, in a strictly dishonourable fashion. That point has to be reiterated because of the way in which the Government have persevered in their position.
The Bill allows building societies to provide conveyancing services, but the Lord Chancellor has said that the regulations under which a society will be allowed to do so will be so defined that a society will be able to provide conveyancing services only for the customers of other building societies and not for its own customers. The principle is being conceded, but at the same time the Government are specifying that it will be under rules that will make the practice so unattractive that building societies will not do conveyancing. It is a confidence trick to fulfil the principle in such a fashion.
The Government are betraying the promises and pledges given to me by the Solicitor-General and reiterated in the House by the Prime Minister. There is no point in being mealy-mouthed about it. The Solicitor-General promised that building societies would be allowed to do conveyancing for their own customers, not for the customers of other building societies. It was clearly envisaged that that would be part of a comprehensive service provided by building societies. On the basis of those promises, I withdrew my House Buyers Bill early in 1984.
It was clear from the Solicitor-General's speech in Committee that the promises were validly made. I do not think that he has been converted to believe that the promises were wrong or that the practice cannot be conceded. He has simply been overruled by the Lord Chancellor. That is a strong argument for getting rid of that medieval anachronism and having a sensible Minister of Justice answerable to the House.
The Solicitor-General has been put in a difficult and embarrassing position. I sympathise with him, but at the same time he is betraying the promises that were held out to me. He may have been overruled by the Lord Chancellor and is not being allowed to fulfil those promises, but that was not made clear in Committee. He did not say, "I promise this but, of course, I cannot promise anything because my boss, the Lord Chancellor, can immediately tell me that black is white and I shall come to the House of Commons and say that black is


white." Since the Solicitor-General made the promise to me, the Lord Chancellor has begun to use the conflict of interest argument as a way of resiling from the promise.
That process is crude. It is clear that it is the Lord Chancellor and not anybody else who is doing this. Ministers in various Departments and former Ministers have said to me privately, "We know that you are right. It will come; do not get over-anxious and push it too far. It's Hailsham. We cannot do anything about it." Clearly the will of one man is being imposed in an area about which he has little background knowledge or information and for which he has no responsibility. He is arguing that customers of building societies should receive independent financial advice. That is a financial matter, not a legal one.
At the same time, the Lord Chancellor is betraying the Government's policy on competition. We seek to extend the principle of competition through the new clause by allowing more organisations to compete to serve consumers. I should have thought that the whole Government. apart from the Lord Chancellor, were committed to that principle.
That is the position, and it has been brought about by a dirty trick, a betrayal and by dishonourable behaviour by the Lord Chancellor. It is directly in his interests to behave in this fashion. It is possible that the income of solicitors will suffer if they lose conveyancing to building societies, but I do not think that they will. I believe that they will maintain a major share of this expanding and lucrative market.
Why should house buyers subsidise the provision of other legal services by solicitors, as they are being asked to do? Secondly, if the income of the profession suffers, it is the Lord Chancellor's responsibility to make it good by improving and extending the legal aid scheme. It is not our responsibility to give solicitors a feather bed to rely on financially to protect their income from competition. The Lord Chancellor's financial interest is that he is responsible for the allocation of legal aid. He is having difficulty in providing legal aid on the level that he would wish because there is a power in the land superior to the Lord Chancellor — the Treasury — which is saying, "Thou shalt not hand out this money."

Mr. Shersby: Is the hon. Gentleman aware that the provision of legal aid is achieved through a Vote which is not cash limited and which has been growing steadily since legal aid was introduced? Surely he is talking, not about the provision of legal aid as such, but about the fees payable to banisters under the scheme?

Mr. Mitchell: That is right, and the Lord Chancellor is in hot water with the profession over those fees. It is wrong that that influence on the Lord Chancellor should lead him to say, "I shall protect the legal profession from this competition which might affect its income because I cannot make as full provision as I should under the legal aid scheme." The Lord Chancellor has a conflict of interests which is resolved in favour of his profession— the legal profession. His motivation is extremely doubtful.
The conflict of interest argument which has been advanced for not allowing building societies to provide conveyancing services for their customers is spurious. It is only an excuse, and that is widely agreed by most knowledgeable people.

Mr. Tony Favell: I am a solicitor, and I have listened with interest to what the hon. Gentleman has

said about a conflict of interests in the case of a solicitor acting for both a building society and a borrower. Does the hon. Gentleman think it would be a good idea for a solicitor to act for a client who is buying a house and for the builder who is selling the house? A great deal of money would be saved, but the Law Society does not allow that to happen because, in its wisdom, it believes that there will inevitably be a conflict of interests. If a solicitor acts on behalf of a builder, who may be an important client, he cannot pay proper attention to the individual who is buying from the builder. If a building society employed a solicitor to act for a purchaser, would that purchaser not he put in exactly the same position, and would that not be undesirable?

Mr. Mitchell: In answer to that I shall cite the reply of the BSA to the Lord Chancellor, who put forward the argument about conflicts of interest. The letter stated:
the conflict of interest to which you refer arises regardless of the status of the conveyancer (i.e. independent or employed) if he has accepted instructions from both parties to the transaction. While in either case the ultimate paymaster is the borrower, in practice the only way of ensuring that a borrower receives totally independent advice is to incur the cost of separate professional advisers on both aspects of the transaction.
In other words, a conveyancer can act for both parties, in which case there is a conflict of interests, and the Law Society does not stop that. Where a conflict of interests is resolvable in favour of an extra fee for a solicitor, it is permissible, but where it is in favour of an employed solicitor, it is not permissible. The argument folds on that basis and on the reality that people face when buying houses.
The Which? survey shows—this fact is demonstrable from all our experiences — that people go first to a building society and subsequently to a solicitor, whom they regard as a type of mechanic. He has a function, but it is less important than securing a mortgage. In most cases the terms of the mortgage are agreed before people go to a solicitor for the subordinate function of conveyancing. We are not talking about a world where people want or get independent financial advice.
In most aspects of the transaction the interests of the lender and borrower are identical. People expect to receive advice as purchasers about the property, but not as lenders or borrowers. Indeed, solicitors are not qualified to give independent financial advice about a mortgage. They do not have the experience, they are not financiers and they are not answerable for their financial advice. It has been argued that people need independent financial advice about a mortgage, but the evidence from surveys is that they do not want it or receive it. Therefore, the conflict of interests argument is specious.

Mr. Christopher Hawkins: The problem is not advice on the mortgage as such in the conventional sense. Almost all building societies and banks charge almost exactly the same interest rate. The customer wants and needs advice on the clauses in the mortgage contract because it is like no other contract that any of us ever signs. It does not specify the price of the purchase, but says that the purchaser will be charged an interest rate such as the building society may care to choose at any time during the following 25 years.
I am anxious that the hon. Gentleman should have his way on this matter, if we can resolve this issue. Some


building societies are charging different rates for old and new borrowers, so there is no safeguard on interest rates. If we could get a code of practice which stated that building societies must charge the same rate to both existing and new borrowers, the client would have the safeguard of knowing that he was being charged the market rate. In that case, I would not mind if solicitors did not comment on the contract, except in so far as some societies build in onerous resettlement clauses so that if a customer does not like his interest rate which may have been pushed higher for existing borrowers, a customer is partially locked in because it is expensive to re-contract.
If we can get round that problem, I would agree with the hon. Gentleman. I wish that he would comment on that because it is a conflict of interest for everyone who signs a mortgage contract, not only for a few.

Mr. Mitchell: That is a wide-ranging problem. It is a problem on which solicitors in independent practice do not give advice to their clients. Why, therefore, should that be singled out as an area in which only employed solicitors working for the building societies have to give advice and in which people are disbarred from turning to those employed solicitors by the conflict of interest in that area. That point is not valid because it applies to all solicitors. What might be valid in the hon. Gentleman's argument is that solicitors can advise on the terms of the mortgage. That is another point. But it is interesting to note from studies carried out by building societies of their customers —the Halifax building society surveyed its customers and, more importantly, its branches—that solicitors do not give advice on the terms of the mortgage. That is the important issue. It is so rare for advice to be given that, for practical purposes, it does not exist. That is another area where a conflict of interest is alleged, but which in practice does not worry people.
I echo the remarks of my hon. Friend the Member for Ipswich (Mr. Weetch) that solicitors, whether employed or in private practice, are bound by the practice rules. Those practice rules can and should be used to obviate exactly the problems that have been held out as producing a conflict of interest. It is also important to emphasise that Ministers, especially the Lord Chancellor, have never specified what that conflict of interest is. We are asked to proceed on the basis of assertions and a specious argument which is never demonstrated and never proved. The Lord Chancellor never defines what he is talking about. Pressed to give a definition, he retreats into a cloud of gas and assertion which is never demonstrable. The practice rules will take care of the conflict of interest.

Mr. Christopher Hawkins: In Committee, the Solicitor-General defined the conflict of interest in reply to questions from me. He said that a very small conflict of interest was possible over title, but that in practice interest was almost the same for the borrower as for the lender so that it was not significant. But he thought that the serious conflict of interest arose on commenting on the terms of the mortgage. That is the conflict of interest upon which I keep inviting the hon. Member for Great Grimsby (Mr. Mitchell) to concentrate, because I believe that it is the sticking point for the Government. Much as I agree with everything that the hon. Member for Great Grimsby has said—I can see that he is upset about not getting the concession that he was expecting—I think that that is a

genuine conflict which we must resolve. I have suggested some ways of doing it, but the hon. Member may not agree with those.

Mr. Mitchell: We are agreed that the terms of the mortgage are rarely queried by independent solicitors. Therefore, on the basis of a service that people do not receive, other people will be excluded from a service which would be beneficial, competitive and cheap. There is no more specious argument than that.
On the conflict of interest, I rest my argument on the fact that solicitors do not give independent financial advice and are not qualified to give it. They are not legally responsible for any independent financial advice that they give. Indeed, independent solicitors often have a direct interest in channeling people to a building society with which they have some preferential financial arrangement. That in itself is a conflict of interest. Let us not give the impression that independent solicitors give independent advice and that that can be used as an excuse to say that people going to a building society should have independent advice. They will not necessarily get it from independent solicitors.
The arguments about conflict of interest are specious. However, the Lord Chancellor stands bloody but unbowed at the end of the arguments still asserting what he cannot prove and will not demonstrate. He sits there like a garrulous Buddha making assertions about a conflict of interest which, for practical purposes, does not exist on any serious scale.
The Solicitor-General made a charming speech in Committee, the gist of which was that this matter can be considered later. The message I received from that was that, in two years' time, when we have a sane or a different Lord Chancellor, the Government will fulfil the promises that they made. That is not good enough. We have a chance to do it now in the Bill, in terms which entrench the proposal by the building societies for a code of practice. I want a code of practice for the estate agency side of building societies. I certainly want it to be established for the conveyancing side of building societies. It is a chance to cover all the points that the Solicitor-General would want covered—even those points that the Lord Chancellor might want covered—in a clear and defined form which allows the solicitors to operate for the building societies.
I shall not quote the code of practice, because it has been circulated to hon. Members, but it provides that the customer shall be warned off in certain circumstances, that the solicitor shall give a precise definition of the services that he provides, what he is doing and what he is not doing, that he shall specify the fees and the charges and that, in some cases, he shall not act. The suggested code of practice could be rewritten. It might be the basis for a better code of practice. It could be expanded and better defined. We are arguing simply that we should write it into the Bill so that we can set down a respectable and effective code of practice.
The Lord Chancellor holds out some prospect of that in his letter to the building societies. I hope that it is not just a fob-off. He says:
This need not be the end of the matter.
He also stated that it might be possible
to overcome the difficulties which concern me … The best way forward is to continue work on a code of practice in the context of work on those rules.
If the Lord Chancellor is of that opinion, we should be obliging him in the Bill by specifying a code of practice which can be worked out subsequently.
I hope that we can pass the proposal, which concedes what the Lord Chancellor wishes, because it opens the way to the important principle of competition to serve the consumer. That is all that we are trying to get. Here is an expanding market in which house prices are increasing and in which the fees payable are increasing, in which much money is flowing into the market and in which we need competition to serve the consumer. We need competition for shares of that expanding market. It is wrong that solicitors should be feather-bedded by the exclusion of the competition from building societies in an area where, if building societies were allowed to operate, they could provide a comprehensive service such as solicitors should provide.
Following the pattern of Scotland, English solicitors are setting up solicitors' property centres. I welcome that. It is a beneficial development and an important advance. I am glad to see solicitors competing for their share of the cake. I am sorry that the Law Society is so laggardly in its rules.

Mr. Favell: Is the hon. Member for Great Grimsby (Mr. Mitchell) interested in allowing only building societies to act for both parties, or is he in favour of banks also acting for borrowers? I remind him that there have been some unfortunate incidents involving banks. Would he be happier if consumers were represented by solicitors also acting for Johnson Matthey? Would he be happy for estate agents selling a house also to employ a solicitor to act for their purchaser? Would he be happy for solicitors to act for both parties? Would he be happy for licensed conveyancers to act for both parties? All those instances would save money, but they would not protect the public.

Mr. Mitchell: In answer to that valid point, I must say that I am in favour of maximum competition and of people competing to serve the consumer comprehensively. The proposal for banks to do conveyancing came not only from me but from the Government. It was the Government's proposal that banks and building societies should be allowed to do conveyancing using employed solicitors for the range of property, registered and non-registered. My Bill restricted it to registered property. In this instance, we are talking only about building societies.
The principle of competing to provide a comprehensive service is valid. I should like solicitors to provide a comprehensive service through their property centres and estate agents through having employed conveyancers. Building societies should provide a comprehensive service by entering all aspects of house provision. I must emphasise that that is important, as it stops the drift of building societies into becoming big financial institutions. If the road to provide a comprehensive service to the house buyer is barred by the Government or the Lord Chancellor's whim, they will be forced much more in the direction of financial institutions and away from the prime and original purpose, which is service to the house buyer. That is what I want to see. Therefore, I want comprehensive competition. I do not see why building societies should have to face it with a ball and chain tied round their leg by Lord Hailsham when the solicitors can provide property centres, and the estate agents can do conveyancing.
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The costs of conveyancing have come clown substantially with the advent of competition. However, it is a rich market and I want to keep the pressure up. The consumer has no responsibility to provide, in any guaranteed way, an income to the legal profession for other aspects of legal business. There is every reason for expanding competition. What we are arguing for today will undoubtedly come. Even Lord Hailsham cannot hold back the tide of progress for ever. We should take the opportunity to allow competition on a sane, sensible and regulated basis which takes care of so many of the unrealistic fears which have been voiced by Lord Hailsham.
This is an argument on which right and honour are entirely on the side of the change we are proposing in this new clause. It is not right for the Government to behave in this fashion. It is dishonourable to betray the word they gave me as a Back Bencher. There are other important issues at stake. All the opinion polls show that people want the building societies to be able to provide a comprehensive service. The consumer organisations, which are there to protect the consumer and speak for them, want it and they say chat there is no problem. The building societies want it and can provide economies of scale and can use their computers and provide the kind of comprehensive service that the house buyer wants. Real competition and a genuine improvement in the range of choice to the consumer requires that comprehensive service. I can see no logic in the Government's position if they refuse the proposal.

Mr. Christopher Hawkins: It is unfair of the hon. Member for Great Grimsby (Mr. Mitchell), in his undoubted enthusiasm and sincerity, to say that the Lord Chancellor is guilty of just a whim. I believe that when the Government gave the pledge they meant to honour it and they have now looked into the problem in more detail and it has turned out that serious problems are involved.
As the hon. Member for Great Grimsby knows, in principle I am strongly in favour of what he wants, but I have bumped into the conflict of interest. I should like to explain briefly why solicitors have never looked at mortgage contracts in detail, although they should. Perhaps the hon. Member for Great Grimsby will ponder on the fact that until recently we had a cartel of building societies of which many people disapproved. I did not disapprove because, since they were mutual friendly societies and non profit making, it was fine by me if they jointly set the interest rate. If they had been using the cartel to stuff up the interest rate to make vast profits and had been profit maximising plcs, then, of course, I would have been against the cartel. However, a cartel operating in a mutual society movement is nowhere near as bad as a cartel in a profit maximising environment.
The solicitors were faced with the fact that the building societies were a cartel. They fixed a common interest rate and, crucially, until recently building societies always charged the same interest rate for their existing borrowers and their new borrowers, which was the cartel rate. Therefore, why should a solicitor bother to look at a contract where the interest rate was set to suit the market at the time? Even if the contract said that the borrower would be charged such rate as the building society may choose from time to time, in practice, every solicitor knew that that meant the borrower would be charged at the cartel


rate. Therefore, solicitors got used to not bothering too much about the mortgage contract. Incidentally, given that the suppliers of mortgages have been praised by all parties in the House while they have been mutual societies operating specifically to help home ownership, there was probably little need for the solicitors to feel that they were dealing with a bunch of crooks who might be trying to rip off the customer.
However, we are now introducing a Bill in an age when the cartel has gone and where a number of building societies, I am sad to say, have started the practice of cutting the interest rate for new borrowers only and leaving it up for existing borrowers. That means that one could be heavily penalised in a way that is not specified in the contract. It should be pointed out that the contract does not safeguard a borrower from building societies charging two different interest rates. I would prefer the Government to have a mortgage Bill that stopped that nasty practice.
In addition, we should get rid of onerous resettlement clauses. If one is locked in by the higher interest rate for the existing borrower and there is also a big penalty for settling early, one cannot re-contract and become a new borrower at a lower rate with a different society. If we got rid of those practices, I would go all the way with the hon. Member for Great Grimsby and say that I could not care less whether solicitors looked at the mortgage contract. However, we do not have those safeguards.
I have suggested to the building society movement that it should have a code, of practice on mortgages. If the movement produced such a code, I do not believe that the Solicitor-General would now be having to get up to make the speech that we all know that he is about to make. He said in Committee that the only major conflict of interests that needs to be resolved is the mortgage contract.
The hon. Member for Great Grimsby and the hon. Member for Ipswich (Mr. Weetch) cannot get away with saying that that is a minor conflict or that it relates to only a few borrowers. In the new competitive environment that we are creating, where the mutuality and charity status of the movement may become a more bracing and competitive attitude, we cannot be sure that mortgage contracts will always be as if they were guided by a cartel in a charity or mutual type movement. We are going into a different world. Whatever solicitors have done in the past, they must start looking at the mortgage contracts that they are letting their customers sign.
The Lord Chancellor is not asked to do what the hon. Member for Great Grimsby says and ask what solicitors are doing—we all know that they have not been looking at mortgage contracts. The Lord Chancellor's job is to ask what they should be doing. They should be looking at the mortgage contracts and they should not operate where they have a conflict of interests.

Mr. Austin Mitchell: The hon. Gentleman is saying that there is an argument for requiring solicitors in independent practice to give financial advice to customers who come to them to arrange conveyancing. That is not being proposed. His argument put forward on the differential interest rate is valid whether employed solicitors do conveyancing or not. Therefore, it is irrelevant to his point.

Mr. Hawkins: I agree that it would be nice to get rid of the dual interest rate problem and the onerous

resettlement clauses whether or not building societies do conveyancing. However, my point is still valid. Suppose all building societies had identical contracts, which I am not proposing, which had been scrutinised by the Lord Chancellor, the commission and every consumers' association and had been declared marvellous contracts and we knew that they would always charge the same interest rate, none of us would want the solicitor to bother to read the mortgage contract. Because there is a possibility of nasty clauses turning up in the mortgage contract, I believe that the Lord Chancellor has to say that it is the solicitor's duty to look at the contract, not in order to give financial advice, but to give legal advice to tell borrowers what the contract legally locks them into. At the moment, borrowers are locking themselves into a 25-year contract which does not specify the price they will pay. I do not believe that any of us should allow that. I should be delighted if the Government would take action to make each institution charge old and new borrowers the same interest rate and not have onerous resettlement clauses. Therefore, if people were ripped off they could re-contract at low cost.
I shall read part of the Building Societies Association's code of practice which is fairly hilarious. All hon. Members have received immense help from the Building Societies Association. As a result of its advice, the Bill has been dramatically improved. The following part of the association's code of practice makes the Lord Chancellor's case far better than I am able to do:
If the conflict of interest is in respect of a matter which, in all the circumstances, is not of a minor character, the employed conveyancer shall forthwith cease to act for the client.
If a conflict of interest is not of a minor nature, the association's view is that its own solicitors should not act for the client. We are not talking about a minor conflict of interest. We are talking about a 25-year contract that people sign to purchase probably the most expensive object they will ever buy. Some people spend nearly half their annual income on mortgage repayments. We cannot say that there is no conflict of interest when a solicitor says, "Sign this contract which has been dished out by my employer. The contract is perfectly all right, but it does not specify the interest rate and it has a few onerous resettlement clauses which I shall not mention, because my employer would fire me if I did so."

The Solicitor-General (Sir Patrick Mayhew): I thank the hon. Member for Ipswich (Mr. Weetch) for his kind welcome to me in the debate. I return the compliment by saying that we have crossed swords on the topic on a number of occasions, but I have always welcomed and admired not only the dexterity of his attacks but the unfailing courtesy in which they have been expressed. I am grateful for the manner in which he moved the new clause. We are on interesting ground, but it is ground that has been thoroughly surveyed in Committee. Therefore, I believe that my response to the debate can be more succinct than otherwise would be necessary and courteous.
The Government's amendments are further positive evidence of the fact—as the Lord Chancellor, myself and other members of the Administration have repeatedly asserted—that the Government are strongly in favour of legislative progress towards integrated house buying services, subject only to the proper and sensible safeguarding of the customer against becoming the victim of a serious conflict of interest.
What distinguished the speech of the hon. Member for Ipswich from the much longer speech of the hon. Member for Great Grimsby (Mr. Mitchell) was that the hon. Member for Ipswich acknowledged that a conflict of interest can arise. I found it hard to discern in the speech of the hon. Member for Great Grimsby any recognition of that fact. When there is a conflict of interest with a solicitor offering services to a customer of his employer, there is a divided loyalty.
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The Government's amendments are designed to bring the sole practitioner within the scheme of schedule 17, whereby the Lord Chancellor may make recognition rules in respect of those to be permitted to carry out conveyancing services. Under the Bill as drafted, the sole practitioner was omitted. That point was raised by the hon. Member for Isle of Wight (Mr. Ross) in Committee, and I promised that the matter would be considered. I am glad to say that the amendments are the result, and I hope that they find favour with the House.
I can offer the House further evidence and confirmation of the Government's policy in favour of moving towards integrated house purchase services. In December last year, we announced that consultations were to take place on the questions whether conveyancing services might be provided by subsidiary companies to lending institutions, and whether estate agents should be permitted to offer a combined house purchase and conveyancing service to vendors. Those consultations are now complete. In consequence, the Lord Chancellor has decided in principle that, subject to satisfactory safeguards, both subsidiary companies and estate agents should be allowed to offer conveyancing services. The nature of the safeguards that will be needed will be considered carefully by him when he makes the recognition rules under the provisions of schedule 17.
The kind of provision that might feature is a code of practice to prohibit preferential pricing arrangements of the kind so vividly alluded to by my hon. Friend the Member for High Peak (Mr. Hawkins), who knows so much about the subject and speaks without being vulnerable to the charge that he is yet another lawyer out to protect his cosy monopolies.
The new clause requires the commission to prepare, publish and administer a code of practice to cover the provision of conveyancing services by building societies, to be made after consultation with the Lord Chancellor and the Director General of Fair Trading. Societies operating in accordance with such a code would be able to provide conveyancing services to their borrowers.
I take minor issue with the speech of the hon. Member for Great Grimsby. On more than one occasion he spoke of the code. The new clause does not specify a code. No doubt, the hon. Gentleman had in mind the revised code already alluded to which was offered to the Lord Chancellor by the Building Societies Association. I shall say something about that in a moment. The new clause does not specify a code. It makes provision for a code to be provided by the Building Societies Commission.
I turn to the draft code that was kindly provided to the Lord Chancellor by the chairman of the BSA last month. It is a revision of a code which was first put forward in the middle of last year. I shall quote a passage from a letter

that the Lord Chancellor sent to the chairman, Mr. Cox, on 16 May, because it succinctly says what I wish to say in answer to the debate. The letter states:
The adoption of a suitable code of practice may well be the best way of avoiding problems of conflicts of interest. I have seen your code and, while I think there is much to praise and a clear determination to protect the public, I am not at present satisfied that it yet overcomes the inherent problem of a conveyancer serving two masters.
I believe that it is somewhat unrealistic to expect a conveyancer to give advice in the best interests of both parties. The relationship between borrower and lender is one in which the interests of both can all too easily be at odds. Where this happens, both require an advisor who can tell them what they ought to do, not one who is 'impartial' or who is giving one party advice which is entirely against the best interests of the other. The code seems to leave the clients without an advisor at the one point in the transaction where. if a conflict does arise, he most requires this service.
The Lord Chancellor in his letter to the chairman made the point that my hon. Friend the Member for High Peak has just made. He said:
The distinction between a 'major' and 'minor' conflict is, moreover, somewhat puzzling. It is not clear what is 'major' and what 'minor' or, indeed, who should take the responsibility of advising the borrower on such [natters. There seems to me scope here for delay and complexity.
I am sorry to write in such terms, but I think you appreciate the difficulties I have over this. I do not at present think that this code does overcome the problem of a conflict of interest. I should make it clear, however, that this need not be the end of the matter. Clause 101 and Schedule 17 of the Building Societies Bill are deliberately drafted in wide and flexible terms. No amendment to the Bill would be required to enable a code to be used if it proves possible to overcome the difficulties which concern me. All that would be needed would be an amendment to the recognition rules. The content of these rules is very far from settled and I am sure the best way forward is to continue work on a code of practice in the context of work on those rules.
In that passage from the Lord Chancellor's letter, the House will be unable to recognise the machinations of an unscrupulous protector of his profession's cosy monopolies which were conjured up by the hon. Member for Great Grimsby. If I did riot know the hon. Gentleman as well as I do, and if the House did not know the amiable way in which he invariably addresses it, I should feel, on behalf of my noble Friend the Lord Chancellor, a certain fleeting resentment at some of the expressions that the hon. Gentleman applied to him. But I let that pass.
From the passage that I have read from the Lord Chancellor's letter to the chairman of the BSA, it is plain that the Lord Chancellor is motivated by one concern alone —that the Government's desire to enlarge competition should not be fulfilled at the expense of the proper interest of the customer in not becoming the victim of a serious conflict of interest.
In view of what has been said, I feel obliged to cite again some of the examples that I gave in Committee of where the need for separate advice may arise in practice. I used examples that were provided by the chairman of the Luton and Dunstable Law Society, including one involving mortgage terms. One example given by the Luton and Dunstable Law Society was as follows:
That draft mortgage Deed contains a provision that the loan of £86,250 would carry a rate of interest of either …

(i) a rate of interest higher by 6 per cent. than the base lending rate from time to time of the National Westminster Bank plc or
(ii) the rate notified in writing by the company to the borrower." — [Official Report, Standing Committee A, 20 February 1986; c. 479.]

In other words, in this case the life assurance company had an open-ended ability to charge what it liked. I happily


believe that the number of such instances would be small although not negligible, but the customer must be protected from the divided loyalty of the solicitor or licensed conveyancer who is employed by the building society or bank. It is not a matter of conjuring up fantasies. We must have regard for what happens in real life.
In Committee, I also referred to a letter published in the Daily Mail from a manager of a branch of Lloyds bank. He said:
I am the manager of a small branch of Lloyds. In the past five years I have seen the job changing from that of a general financial adviser to that of a salesman of Lloyd's products.
This is not to say that I doubt their worth, but increasingly I have difficulty in giving impartial advice when I am all the time looking to achieve business targets.
So far I think I have been able to achieve a happy compromise, but as I am under increasing pressure to sell 'in-house' products, especially insurance, the impartiality is bound to disappear. By far the worst aspect of this is that the financially less aware will have nowhere to go for advice which will be truly impartial—everyone will have an axe to grind.
That would be just as true- of a solicitor employed by a building society that is in competition with others.

Mr. Christopher Hawkins: As my hon. and learned Friend knows, I entirely agree with the point about the conflict of interest over a mortgage contract. But does he agree that we could get rid of that conflict of interest by having a code of practice on what mortgage contracts should contain?

The Solicitor-General: That is an interesting suggestion. It falls outside my exceedingly limited field of ministerial responsibility, but I shall ensure that it is passed on and considered in the right quarter. However, I agree that that is where the conflict of interest principally arises.
There is great merit in the way in which the Bill is formulated. Schedule 17 empowers the Lord Chancellor to do three things: to make rules for the purpose of recognising institutions as being suitable to undertake the provision of conveyancing services and to recognise institutions under those rules; to exempt them from the present restrictions on persons who can undertake conveyancing; and to impose conditions on those institutions with which they must comply to remain recognised.
Following our consultation, we felt that we could not in all conscience sweep under the carpet serious warnings about a conflict of interest and legislate as though that consultation had never taken place. That would have been dishonourable.

Mr. Austin Mitchell: Will the Solicitor-General give way?

The Solicitor-General: I shall give way in a moment. The hon. Gentleman took me to task for having said to him in February 1984:
We will shortly issue a consultation paper on how best to ensure that conflicts of interest and anti-competitive practices do not arise when solicitors employed by banks, building societies and other organisations are permitted to undertake conveyancing for their employers' customers. We hope to bring forward legislation permitting building societies to offer the service next Session." — [Official Report, 17 February 1984; Vol. 54, c.347.]
It is abundantly plain, and must have been at the time, that if that consultation threw up advice to the effect that

it was impossible to overcome conflicts of interest in all circumstances where the solicitor's employer was lending money, it would be dishonourable to proceed.

Mr. Austin Mitchell: It was also dishonourable for the Government to say that they hoped to bring forward legislation. The intention was clear. Can the Solicitor-General cite any instance of a conflict of interest that was not known at the time that he promised me that building societies would be allowed to do conveyancing through employed solicitors?

The Solicitor-General: It was our intention to introduce legislation. We are not sufficiently arrogant about our confidence in our right thinking to say that, whatever consultation throws up, we shall not be influenced by it. We live and work in the hope that we may be able to overcome these difficulties. The Lord Chancellor's letter makes that clear. Meanwhile, the task is to press ahead with the hard work on the rules, consulting the BSA and others, with a view to bringing them into force with the minimum delay.
Although I regret not being able to commend the new clause to the House, I hope that my explanation—which has taken longer than I intended because I felt obliged to answer the points raised—will lead to the motion and clause being withdrawn.

Mr. John Whitfield: I should declare my interest in the debate. I am a practising solicitor, and, although I do not engage in much conveyancing, I obviously have an interest in the matter.
It is extraordinary that more of my professional colleagues have not spoken in the debate. Apparently none served on the Committee, and that was also extraordinary. As a profession, I believe that we have much to be proud of, and that is at the heart of this debate. The problem is that the consumer is in danger of being sacrificed on the altar of competition. The hon. Member for Ipswich (Mr. Weetch) said that the consumer was king and that if he demanded it he should have the right to have it. I shall explain why that is a strange proposition.
Principally, we are concerned about conflicts of interest. The hon. Member for Great Grimsby (Mr. Mitchell) belittled this concept and seemed to be saying that conflicts of interest can be got round, avoided or somehow rubbed out. That cannot be true. They cannot be overcome simply. Warning consumers that conflicts of interest exist does not mean that they will go away. No amount of warning in this day and age is sufficient for the majority of consumers. They want to buy a house and they have set their heart on one. They want as large a mortgage as they can possibly get, possibly more than they can afford, and warnings will not prevent them from going ahead with the transaction.
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Perhaps the most vivid example is the conflict of interest between banks and customers on the making of wills and the appointing of executors. Surely no customer would appoint a bank to be an executor if he knew how much it would cost—it is usually 5 per cent. of the assets in the estate. Despite that, time after time, perfectly straightforward estates are complicated by the involvement of banks and the extortionate—there is no other word for it — charges that banks make for the administration of wills.
Competition is there to serve the consumer, and it is the Government's responsibility to see that that is the case and that competition does not become a god in its own right. The hon. Member for Great Grimsby said that my profession has been featherbedded against competition from building societies. To give him some credit, his initiative in the House Buyers Bill has made a fundamental change in the profession. Solicitors engaged in conveyancing are not featherbedded against competition from their own colleagues, and we are not afraid of competition from building societies. I doubt whether building societies will do conveyancing for less than solicitors are prepared to charge, and this is one of the sectors in which the consumer will be duped. He will be offered a package of an all-in loan which will cover his costs, and he will not know what the costs are. By the time that he has finished paying for the conveyancing, he will have paid many more times what he would otherwise have paid.
Another charge made by the hon. Member for Great Grimsby is that solicitors are not liable for advice that they may give on financial matters. Nothing can be further from the truth. We are men of affairs and give advice to clients on the full range of aspects of house buying, and we are liable personally for that advice. If it turns out to be wrong, we are personally liable to reimburse the client.
Various uncomplimentary statements have been made about my noble Friend the Lord Chancellor. My hon. and learned Friend the Solicitor-General has already rejected them, as we must. My noble Friend has a tremendous record of looking after the profession, and he is the last man who would stand in the way if he believed that what was proposed was right.
It has been alleged that solicitors are simple mechanics in the matter of house transfer, but this is inaccurate. A solicitor advises as to the suitability of the property for the buyer. He advises as to the terms of the contract, and all the flak that has been thrown at my profession about sending out inquiries that do not mean anything before contract is largely unfounded. The solicitor advises as to the financial aspects of buying a house, on the terms and on the cost of the mortgage. There can be no question of the enormous institutions that building societies are becoming giving the detailed personal independent advice through their employed legal people that is offered by independent solicitors.
How can a solicitor employed by a building society, who has his business targets, possibly have the time, patience, inclination or financial incentive to give independent advice to borrowers? All these are major matters, and even if the building societies' code which would make it necessary for the building society solicitor to send the customer elsewhere were to be implemented, as my hon. Friend the Member for High Peak (Mr. Hawkins) suggested, that would be unlikely to happen. How can the building society solicitor become involved with the detailed administrative arrangements of a house purchase and sale transaction? He will not have the time and inclination. All that he will be interested in is processing as many loans as possible in as short a time as possible. The borrower, the consumer, will be the sufferer.
We should protect the independence of the legal profession. It is a vital institution in any civilised society. In-house conveyancing does not cost the public any more.

It is probably already costing the consumer a great deal less than he would pay a building society if the new clause were adopted.
There is some pressure on me to sit down, so I shall end my speech by saying that I wholeheartedly support the anxieties of my noble Friend the Lord Chancellor about conflicts of interest and that I agree with the provisions of schedule 17. They will bring a tremendous wind of change to the profession, and the prospect of that has already brought some improvements to the profession. The Law Society has done its best, but it cannot keep things in the same way as they have always been. It has tried to do that, and that has been its failure. We have to admit that. The consumer must be protected, and it is the Government's responsibility to provide that protection. It is clear that the hon. Members for Great Grimsby and for Ipswich will not provide it.

Mr. Weetch: Parts of the debate have been entertaining. I thank the Solicitor-General for his reply, although I am not sure whether to glean any comfort from it. I never am when I have replies from lawyers. Such replies are like mounting the Alexandine steps, which, as hon. Members will know, are a mirage. They appear to be going upwards, but when one treads on the steps one finds that they are, inevitably, going downwards. I suspect that that is what has happened in this case.
The new clause will not do anything revolutionary. Solicitors conveyance property, and in a short time licensed conveyancers will be doing so as well on their own account. Suddenly, it is said that if we put the same class of person behind a building society plate glass window the whole conveyancing world will collapse because of the conflicts of interest that are not capable of being resolved. I reject that argument.
The Government have created a new competitive world in financial institutions. I am glad to see it, because it could have done with some more competition, goodness knows. Building societies are in a new competitive world. If they engage in ripping off the consumer through conflicts of interest, they will not survive in the new competitive climate. That, at the end of the day, will be the answer to the problem. Conflict still remains. I do riot accept the Solicitor-General's reply, however hard he tried to bring some comfort to us. Therefore, I shall divide the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 114, Noes 225.

Division No. 205]
[8.39 pm


AYES


Abse, Leo
Callaghan, Jim (Heyw'd &amp; M)


Adams, Allen (Paisley N)
Campbell, Ian


Anderson, Donald
Campbell-Savours, Dale


Archer, Rt Hon Peter
Canavan, Dennis


Ashton, Joe
Clarke, Thomas


Atkinson, N. (Tottenham)
Clay, Robert


Bagier, Gordon A. T.
Clelland, David Gordon


Banks, Tony (Newham NW)
Clwyd, Mrs Ann


Barron, Kevin
Conlan, Bernard


Beaumont-Dark, Anthony
Cook, Frank (Stockton North)


Beckett, Mrs Margaret
Cook, Robin F. (Livingston)


Benn, Rt Hon Tony
Corbett, Robin


Bennett, A. (Dent'n &amp; Red'sh)
Craigen, J. M.


Bermingham, Gerald
Cunningham, Dr John


Boyes, Roland
Dalyell, Tarn


Brown, Gordon (D'f'mline E)
Davies, Ronald (Caerphilly)


Brown, Hugh D. (Provan)
Davis, Terry (B'ham, H'ge H'l)


Buchan, Norman
Deakins, Eric


Caborn, Richard
Dewar, Donald






Dixon, Donald
Marshall, David (Shettleston)


Dobson, Frank
Martin, Michael


Dormand, Jack
Mason, Rt Hon Roy


Douglas, Dick
Maxton, John


Dubs, Alfred
Maynard, Miss Joan


Dunwoody, Hon Mrs G.
Michie, William


Eadie, Alex
Mitchell, Austin (G't Grimsby)


Eastham, Ken
Morris, Rt Hon J. (Aberavon)


Evans, John (St. Helens N)
Nellist, David


Ewing, Harry
Oakes, Rt Hon Gordon


Fatchett, Derek
O'Brien, William


Faulds, Andrew
Park, George


Fields, T. (L 'pool Broad Gn)
Patchett, Terry


Foster, Derek
Pendry, Tom


Foulkes, George
Pike, Peter


George, Bruce
Radice, Giles


Gilbert, Rt Hon Dr John
Redmond, Martin


Godman, Dr Norman
Rees, Rt Hon M. (Leeds S)


Hamilton, James (M'well N)
Roberts, Ernest (Hackney N)


Hamilton, W. W. (Fife Central)
Robinson, G. (Coventry NW)


Harrison, Rt Hon Walter
Rogers, Allan


Hogg, N. (C'nauld &amp; Kilsyth)
Short, Ms Clare (Ladywood)


Holland, Stuart (Vauxhall)
Skinner, Dennis


Home Robertson, John
Smith, Rt Hon J. (M'ds E)


Hoyle, Douglas
Spearing, Nigel


Hughes, Roy (Newport East)
Strang, Gavin


Janner, Hon Greville
Thomas, Dafydd (Merioneth)


John, Brynmor
Thompson, J. (Wansbeck)


Jones, Barry (Alyn &amp; Deeside)
Thome, Stan (Preston)


Kaufman, Rt Hon Gerald
Tinn, James


Leadbitter, Ted
Wardell, Gareth (Gower)


Leighton, Ronald
Weetch, Ken


Lewis, Ron (Carlisle)
Welsh, Michael


McCartney, Hugh
Wigley, Dafydd


McDonald, Dr Oonagh
Wilson, Gordon


McKay, Allen (Penistone)
Young, David (Bolton SE)


McNamara, Kevin



McWilliam, John
Tellers for the Ayes:


Madden, Max
Mr. Frank Haynes and


Marek, Dr John
Mr. Mark Fisher.




NOES


Alton, David
Dorrell, Stephen


Amess, David
Douglas-Hamilton, Lord J.


Ancram, Michael
Dunn, Robert


Ashby, David
Durant, Tony


Aspinwall, Jack
Dykes, Hugh


Atkins, Robert (South Ribble)
Favell, Anthony


Atkinson, David (B'm'th E)
Fenner, Mrs Peggy


Baker, Rt Hon K. (Mole Vall'y)
Field, Frank (Birkenhead)


Banks, Robert (Harrogate)
Fletcher, Alexander


Batiste, Spencer
Fookes, Miss Janet


Best, Keith
Forsyth, Michael (Stirling)


Biffen, Rt Hon John
Forth, Eric


Biggs-Davison, Sir John
Fox, Marcus


Blaker, Rt Hon Sir Peter
Franks, Cecil


Boscawen, Hon Robert
Fraser, Peter (Angus East)


Bottomley, Peter
Freeman, Roger


Bottomley, Mrs Virginia
Freud, Clement


Bowden, Gerald (Dulwich)
Fry, Peter


Brandon-Bravo, Martin
Galley, Roy


Bright, Graham
Garel-Jones, Tristan


Brinton, Tim
Gow, Ian


Brittan, Rt Hon Leon
Gower, Sir Raymond


Brown, M. (Brigg &amp; Cl'thpes)
Greenway, Harry


Bruce, Malcolm
Gregory, Conal


Bryan, Sir Paul
Griffiths, Sir Eldon


Buck, Sir Antony
Griffiths, Peter (Portsm'th N)


Budgen, Nick
Ground, Patrick


Carlile, Alexander (Montg'y)
Grylls, Michael


Cash, William
Gummer, Rt Hon John S


Channon, Rt Hon Paul
Hamilton, Hon A. (Epsom)


Chope, Christopher
Hamilton, Neil (Tatton)


Clark, Hon A. (Plym'th S'n)
Hancock, Michael


Clark, Sir W. (Croydon S)
Hanley, Jeremy


Clegg, Sir Walter
Hannam, John


Conway, Derek
Hargreaves, Kenneth


Cope, John
Harris, David


Couchman, James
Haselhurst, Alan


Cranborne, Viscount
Hawkins, C. (High Peak)





Hawksley, Warren
Percival, Rt Hon Sir Ian


Hayes, J.
Pollock, Alexander


Hayward, Robert
Porter, Barry


Heathcoat-Amory, David
Portillo, Michael


Heddle, John
Powell, William (Corby)


Henderson, Barry
Powley, John


Hickmet, Richard
Prentice, Rt Hon Reg


Hicks, Robert
Price, Sir David


Hind, Kenneth
Proctor, K. Harvey


Hogg, Hon Douglas (Gr'th'm)
Raison, Rt Hon Timothy


Holland, Sir Philip (Gedling)
Rathbone, Tim


Howard, Michael
Renton, Tim


Howarth, Gerald (Cannock)
Rhodes James, Robert


Howell, Ralph (Norfolk, N)
Rhys Williams, Sir Brandon


Howells, Geraint
Ridsdale, Sir Julian


Hubbard-Miles, Peter
Rifkind, Rt Hon Malcolm


Hunt, David (Wirral W)
Roberts, Wyn (Conwy)


Hunt, John (Ravensbourne)
Robinson, Mark (N'port W)


Jackson, Robert
Ross, Stephen (Isle of Wight)


Jenkin, Rt Hon Patrick
Ryder, Richard


Johnson Smith, Sir Geoffrey
Sackville, Hon Thomas


Jones, Gwilym (Cardiff N)
Sainsbury, Hon Timothy


Jones, Robert (Herts W)
Sayeed, Jonathan


Kellett-Bowman, Mrs Elaine
Shaw, Sir Michael (Scarb')


Kershaw, Sir Anthony
Shelton, William (Streatham)


Key, Robert
Shepherd, Colin (Hereford)


King, Roger (B'ham N'field)
Shersby, Michael


Kirkwood, Archy
Shields, Mrs Elizabeth


Knight, Greg (Derby N)
Silvester, Fred


Knowles, Michael
Sims, Roger


Knox, David
Skeet, Sir Trevor


Lang, Ian
Smith, Tim (Beaconsfield)


Latham, Michael
Spencer, Derek


Lawler, Geoffrey
Spicer, Jim (Dorset W)


Lawrence, Ivan
Stanbrook, Ivor


Lee, John (Pendle)
Steel, Rt Hon David


Leigh, Edward (Gainsbor'gh)
Steen, Anthony


Lennox-Boyd, Hon Mark
Stern, Michael


Lester, Jim
Stevens, Lewis (Nuneaton)


Lewis, Sir Kenneth (Stamf'd)
Stewart, Ian (Hertf'dshire N)


Lightbown, David
Sumberg, David


Lilley, Peter
Taylor, Teddy (S'end E)


Livsey, Richard
Tebbit, Rt Hon Norman


Lord, Michael
Temple-Morris, Peter


McCrindle, Robert
Thomas, Rt Hon Peter


McCurley, Mrs Anna
Thompson, Patrick (N'ich N)


MacGregor, Rt Hon John
Thornton, Malcolm


MacKay, Andrew (Berkshire)
Thurnham, Peter


MacKay, John (Argyll &amp; Bute)
Townend, John (Bridlington)


Maclean, David John
Tracey, Richard


McLoughlin, Patrick
Trippier, David


McNair-Wilson, M. (N'bury)
Twinn, Dr Ian


McQuarrie, Albert
van Straubenzee, Sir W.


Madel, David
Wainwright, R.


Major, John
Wall, Sir Patrick


Malins, Humfrey
Wallace, James


Malone, Gerald
Waller, Gary


Marlow, Antony
Walters, Dennis


Mather, Carol
Wardle, C. (Bexhill)


Maxwell-Hyslop, Robin
Warren, Kenneth


Mayhew, Sir Patrick
Watts, John


Meadowcroft, Michael
Wells, Bowen (Hertford)


Merchant, Piers
Wells, Sir John (Maidstone)


Meyer, Sir Anthony
Wheeler, John


Miller, Hal (B'grove)
Whitfield, John


Mills, lain (Meriden)
Winterton, Mrs Ann


Mitchell, David (Hants NW)
Winterton, Nicholas


Morrison, Hon P. (Chester)
Wolfson, Mark


Moynihan, Hon C.
Wood, Timothy


Neale, Gerrard
Woodcock, Michael


Newton, Tony
Yeo, Tim


Norris, Steven
Young, Sir George (Acton)


Page, Richard (Herts SW)



Patten, Christopher (Bath)
Tellers for the Noes:


Pawsey, James
Mr. Donald Thompson and


Peacock, Mrs Elizabeth
Mr. Peter Lloyd.


Penhaligon, David

Question accordingly negatived.

New Clause 26

COMPETITION

'A building society shall not seek to lend money to a member where that member has sought a loan from another lender or finance broker and where that lender has sought the society's permission to register a second charge with the Land Registry.'.—[Mr. Shersby.]

Brought up, and read the First time.

Mr. Shersby: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker: With this it will be convenient to discuss new clause 27—
Prohibition on second charge—
'A building society shall not place a restriction in its mortgage deed which prevents its member from obtaining finance from another source without first obtaining the society's consent.'.

Mr. Shersby: First, I declare an interest. I am vice-president of the Corporation of Finance Brokers.
My purpose in moving new clause 26 is to draw attention to what many finance brokers consider to be an anti-competitive practice arising from an abuse of a dominant position by some building societies which require their borrowers to covenant within the mortgage deed not to enter into any further borrowing which requires the security of a charge upon the property without first obtaining the consent of the society in writing.
To enforce that covenant societies then apply to the Chief Land Registrar for a notice of a restriction to be entered into the register of title relating to the property. The result of that restriction is that the societies are contacted and given early notice of a borrower's intention to seek a loan elsewhere.
Building societies defend that practice by claiming that such a requirement enables them to encourage borrowers to explore their existing financial commitments and to exercise restraint if it seems likely that they may over-commit themselves. All that would be laudable were it not for the fact that building societies are themselves entering into the personal loan and second mortgage market.
In fact, the finance brokers are aware of many instances where an approach to a building society seeking consent to a second charge immediately results in that society calling in its borrowing member and persuading him or her to take a loan by way of a further advance or a second loan from the society itself.
That practice is seen by finance brokers as poaching. It makes use of the stranglehold which societies have, due entirely to the covenant in the mortgage deed. It also arises from the dominant position of a society and allows it to make a further advance at little or no cost whereas the information about the availability of further advances is often communicated to the consumer by means of an advertisement paid for and placed in the newspapers by a finance broker.
It can be argued that would-be house purchasers should read and agree to the restrictive covenant when they sign the mortgage deed. Perhaps solicitors should advise their clients on that point rather more effectively than they now appear to do. That point was touched on in the previous debate.
The fact of the matter is that most house purchasers do not read the fine print in the mortgage deed. I have often wondered whether there should be a requirement to put such a restrictive covenant in bold type in red ink, rather

like those warnings that we have all seen on hire purchase contracts. However, hire purchase contracts are rather different from mortgage deeds. Most house purchasers only sign one mortgage deed in their life, or perhaps two or three at comparatively long intervals.
The effect of the restrictive covenant is, in the view of most brokers, to interfere with the borrower's freedom of choice and to influence the borrower in such a way that he feels obliged to take a loan from a building society. That occurs when the borrower is suddenly informed that the society is aware that a loan has been sought from another lender. The borrower can even be called in to discuss the matter with the manager or some other official of his building society. The borrower may then be told that the society can refuse to allow the registration of a second charge, but if he or she would care to take a further advance from the society then, of course, the request can be accommodated over perhaps a 15 or 20-year term, if desired.
What of the claim that societies are protecting their members from over-committing themselves? Let us suppose that the society refuses either to agree to a second charge or to make a further advance. What happens then? The answer is that the borrower can borrow unsecured from another lender, for example, a high street money shop. In that case he could find himself paying high interest rates ranging today from 35 to 44 per cent., or in the case of a conventional hire purchase finance agreement on, say, a three-year-old car a borrower would commonly today be paying around 30 per cent. At the very worst a borrower could go to a loan shark charging horrendous rates of interest.
That compares with about 18 to 19 per cent. APR for loans arranged by members of the Corporation of Finance Brokers who adhere to a code of practice which ensures that they not only bear in mind the interests of their clients, but exercise the utmost integrity in dealing with their affairs, have regulations governing advertising and ensure that money is not spent before a loan is made.
I am sure that my hon. Friend the Economic Secretary will agree that there is much to be said for secured loans at reasonable rates of interest and subject to respectable conditions. Such a position can obtain only if there is free and fair competition between societies, the banks and other established finance houses and the brokers who place business with them.
In the Green Paper which preceded the Bill it was made clear that competition in the provision of financial services is one of the desired objectives. But does the dominant position of certain building societies, which makes it virtually impossible for any other lending source to secure their loan, really add up to competition, or is it really a restrictive or anti-competitive practice?
My hon. Friend the Economic Secretary to the Treasury has indicated in correspondence that he understands that on the whole it is the exception rather than the rule for a borrower to need the society's consent to a second mortgage, and that it is relatively unusual for consent to be refused. That may be so if the borrower really persists, but he will obviously feel inhibited from so doing. One building society which I understand directs requests from borrowers to the provision of a loan by the society is the Nationwide, which is one of the largest societies in the country, and there are others. I ask my hon. Friend the


Economic Secretary to consider whether the Nationwide is observing the policy of greater competition that the Government advance.
9 pm
These matters are of great importance to all members of the public who want to be sure that they have a free and fair choice of financial services in a competitive market. My new clauses are designed to put down a marker and to engage the attention of my hon. Friend the Economic Secretary, to whom I pay tribute for his constant interest in and wise advice on these matters. I know that he is not convinced that an absolute statutory bar on restrictions on the taking of a second charge or the making of an advance when approached for permission to make a second charge is the right way forward. I share his dislike of more and, perhaps, unnecessary restrictions in a rapidly changing mortgage market, but I have sought to indicate that there is a problem and where that problem lies.
I was glad to learn from my hon. Friend the Economic Secretary, in a letter that he wrote me yesterday, that he has arranged for information that I sent him to be provided to the Office of Fair Trading. I am glad to know from him also that the OFT is now to undertake some more general inquiries into the incidence of the practices which I have described and their effects on competition. I hope that all these inquiries can be completed quickly and that everything will be done to ensure free and fair competition, coupled with adequate protection for consumers against excessive interest rates that are often charged on unsecured loans.

Mr. Oakes: I hope that the Government will resist these clauses. The hon. Member for Uxbridge (Mr. Shersby) has presented them as measures that are in favour of competition, but they are far from that, because they seek to exclude building societies from that competition. The hon. Gentleman mentioned one society. I understand that only one society has a prohibition rule that means that the society's consent is required. The building societies have nothing to fear from this issue going to the Office of Fair Trading.
The hon. Member for Uxbridge has talked about people being driven into the hands of loan sharks who charge interest rates of 35 per cent to 40 per cent., but I suggest that the new clauses would do just that. A borrower from a building society is as much a member of the society as a lender, and he is proud to be a member. The building societies have a tremendous record of looking after their members. If a borrower needs extra finance, it is fair for the society of which he is a member to discuss the matter with him. The society will probably say, "Let us examine your financial affairs. Is the best way of solving your financial difficulties the granting of an extra loan? Shall we extend your mortgage? Shall we transfer more money to your mortgage? What is the problem? Can we help you?" That is all that societies do.
The Building Societies Association has informed me that over the years it has had complaints from mortgage brokers and finance companies, but apparently it has never had a complaint from a borrower. The hon. Member for Uxbridge said that the new clauses will act in defence of the borrower and in the interests of competition and fair trading, but apart from the many drafting defects—for example, unregistered land is not covered and there is

reference to unsecured loans—I object to the principle which lies behind them I said, I hope that the Governent will reject them. They will prevent building societies from assisting their members and assist others to lend money.

Mr. Nicholas Winterton: I support the argument that has been advanced so eloquently by my hon. Friend the Member for Uxbridge (Mr. Shersby). I do not pretend for one moment to be an expert on building societies, but I support my hon. Friend because I have received representations from my constituency which I have passed on to him and to which he has responded. I believe that he is highlighting a problem, about which I understand he has had considerable correspondence with the Treasury, especially my hon. Friend the Economic Secretary, and that the Treasury recognises that there could be a problem.

I am sure that: the right hon. Member for Halton (Mr. Oakes) will admit immediately that in introducing the new clauses my hon. Friend said that he had tabled them as markers in the hope that the problems might occur and the concern that has been expressed by constituents to individual Members will be taken fully into account by the Treasury.
I make these remarks with deep interest because the headquarters of the Cheshire building society are in my constituency. It is an excellent society. I have never had a single letter or word of complaint about its practices, and I commend it for the excellent service that it gives to people not only in my constituency but over a wider area.
After considerable research over many months, my hon. Friend the Member for Uxbridge has presented an excellent case to the Treasury. I hope that my hon. Friend the Economic Secretary will give an understanding and sympathetic reply. I doubt very much whether my hon. Friend the Member for Uxbridge intends to press the new clauses to a vote, but he hopes that an area that is causing concern can be taken fully into account by the Treasury. I hope that assurances will be given from the Treasury Bench.

Mr. Ian Stewart: I compliment my hon. Friend the Member for Uxbridge (Mr. Shersby) on a well-argued case, and on the manner in which he put it forward. My hon. Friend the Member for Macclesfield (Mr. Winterton) has just supported him. Equally, the right hon. Member for Halton (Mr. Oakes) asked us to resist the new clauses. In fact, it would not be wise to put them on the statute book.
I listened to my hon. Friend the Member for Uxbridge with considerable interest and a good deal of sympathy because the matter that he raised is a cause for concern and, as he mentioned, we have been in correspondence about it. I have also had a letter from the hon. Member for Thurrock (Dr. McDonald)—only in the past 48 hours, so I hope that she will forgive me for not having replied, but perhaps I can do so now.
One of the basic themes of the Bill is competition. By letting societies offer a wider range of services, we hope that they will be able to respond positively to the competition that they now face in their traditional markets, and to introduce new competition elsewhere. The line between legitimate competitive activity and abuse of market position can be very fine. We need to be vigilant in making sure that one does not turn into the other.
I do not believe that the abuse described by my hon. Friend the Member for Uxbridge is very widespread, but it seems to come close to the line of what is acceptable and possibly even to cross it. I do not think that an absolute statutory prohibition of the sort that is suggested in the new clauses would be the best way to proceed, so I hope that my hon. Friend will not press the new clauses. However, I am glad to have the opportunity to comment on them because I believe that the situation that he has outlined needs further investigation.
As my hon. Friend mentioned, I have passed to the Director General of Fair Trading the papers that he sent to me, and his office is now to undertake more general inquiries into those practices to see whether further action under the competition or fair trading legislation would be appropriate. I hope that, pending the outcome of that investigation, any building society that might be tempted to poach business in that way—to put it crudely, to trade off the efforts of others — will recognise the distaste that is felt in the House for such behaviour. I should add that if that were to become a matter for legislation, which at this stage I do not accept it will, it would be for competition legislation, not for legislation relating to regulation or consumer protection. I shall ensure that my right hon. Friend the Secretary of State for Trade and Industry, who is responsible for those areas, is kept fully informed about it.
In view of that, I hope that my hon. Friend will feel able to withdraw his new clause, but in doing so will be satisfied that we are taking action on the point that he has raised.

Mr. Shersby: I am grateful to my hon. Friend the Economic Secretary for his sympathetic and understanding reply. I am glad that he recognises that there is a problem in this area, and I am grateful for the action he has taken in referring the matter to the Director General of Fair Trading and for drawing to the attention of our right hon. Friend the Secretary of State for Trade and Industry the matter of the competition legislation.
In the light of his satisfactory reply, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 1

THE BUILDING SOCIETIES COMMISSION

Sir George Young: I beg to move amendment No. 1, in page 2, line 14, leave out 'and'.

Mr. Deputy Speaker (Sir Paul Dean): With this it will be convenient to take the following Government amendments: Nos. 2, 3, 8 to 11, 38 to 53, 389 to 395, 54, 55, 57, 61, 79 to 83, 415 to 418, 396 to 399, 84, 111, 124, 126 to 130, 132 to 134, 137, 138, 141, 142, 144, 145, 147, 149, 150, 419, 158, 206 to 209, 402, 212 to 214, 216, 219, 221 to 226, 228, 231 to 233, 236 to 238, 244, 245, 247 to 250, 256 to 260, 262, 268 to 271, 273, 274, 276 to 289, 301 to 305, 309, 330 to 332, 334 to 336, 338 to 340, 405 to 408, 342 to 344, 355 to 373, 404, 374 to 380, 382, 387 and 388.

Sir George Young: The Government have taken the opportunity during the interval between Committee stage and Report to refine the drafting of the Bill and the 176 amendments bear testimony to the energy and dedication of the draftsmen.

Amendment agreed to.

Amendment made: No. 2, in page 2, line 16, at end insert 'and'. —[Mr. Ian Stewart.]

Clause 5

ESTABLISHMENT, CONSTITUTION AND POWERS

Amendments made: No. 3, in page 4, line 24, leave out from beginning to end of line 29 and insert
'to them advances secured on land for their residential use.'.

No. 4, in page 5, line 28, at end insert 'and'.

No. 5, in page 5, line 30, leave out from `resolutions;' to end of line 31.

No. 6, in page 5, line 37, at end insert—
'() In this Act, except sections 10 to 13, "land", in the expression "advance secured on land", means land in the United Kingdom, and in so far as land in other countries or territories is, under any provision of this Act, land on which advances may be secured, land in that other country or territory.'

No. 7, in page 5, line 37, at end insert—
'(9) Any obligation imposed by this Act or the rules of a building society to give or send notices or other documents to members is subject to paragraph 13A of that Schedule. —[Mr. Ian Stewart.]

Clause 6

POWER TO HOLD LAND ETC, FOR PURPOSES OF ITS BUSINESS

Amendments made: No. 8, in page 5, line 40, leave out from 'may to end of line and insert
', otherwise than by acquisition, provide itself with premises'.

No. 9, in page 6, line 4, at end insert—
'(3A) A building society may exercise the powers conferred by subsections (1) and (2) above as regards premises situated outside, as well as premises situated within, the United Kingdom'.

No. 10, in page 6, line 5, after 'acquisition', insert 'or provision'.

No. 11, in page 6, line 7, leave out
'premises may be acquired and held'
and insert
'society may acquire or otherwise provide itself with and hold the premises'. —[Mr. Ian Stewart.]

Clause 7

POWER TO RAISE FUNDS AND BORROW MONEY AND LIMIT ON NON-RETAIL FUNDS AND BORROWING

Mr. Ian Stewart: I beg to move, amendment No. 12, in page 6, line 27, leave out 'or loans'.

Mr. Deputy Speaker: With this it will be convenient to take the following Government amendments: Nos. 13, 15, 16, 25 to 31, 34 to 37, 85, 87, 88, 92 to 98, 103 to 105, 112, 140, 146, 239, 307, 308, 310 and 381.

Mr. Stewart: What my hon. Friend the Under-Secretary of State for the Environment has said about his amendments goes for my amendments as well.

Amendment agreed to.

Amendments made: No. 13, in page 6, line 40 leave out
'or otherwise lent to'.

No. 14, in page 7, line 1, after 'subsection'. insert
'(4A) and'.

No. 15, in page 7, line 7, leave out 'or otherwise lent to'.

No. 16, in page 7, line 18, leave out 'or otherwise lent to'.

No. 17, in page 7, line 23, at end insert—

'(4A) If a building society so elects with respect to any financial year its liabilities in respect of shares or deposits falling within paragraphs (c) or (d) (but no other provision) of subsection (4) above shall, subject to subsections (4B) and (4C) below, not be counted towards the limit in force under subsection (3) above.
(4B) The liabilities of the society to any person shall not, by virtue of an election under subsection (4A) above, be disregarded at any time during the financial year to which the election relates if at that time the liabilities to that person exceed the prescribed amount; and in that event all the society's liabilities to that person shall count towards the limit in force under subsection (3) above.
(4C) To be effective for the purpose of subsection (4A) above, an election must apply to the society's liabilities in respect of all its shareholders and depositors who fall within subsection (4)(c) and (d) above and notice of it must be given to the Commission before the beginning of the financial year to which it relates.
(4D) A copy of the notice shall also be sent to the central office and the central office shall keep the copy in the public file of the society.'.

No. 18, in page 7, line 31, leave out 'and'.

No. 19, in page 7, line 33, after first 'subsection', insert `subsections (4A) to (4D) above'.

No. 20, in page 7, line 33, after 'and', insert '(c) make'.

No. 21, in page 7, line 34, leave out 'provisions as appear' and insert ' provision as appears'.

No. 22, in page 8, line 25, at end insert—
'(11A) The prescribed amount for the purposes of subsection (4B) above is £50,000 or such other amount as is for the time being substituted for it by order of the Commission made with the consent of the Treasury'.

No. 23, in page 8, line 26, leave out 'or (11)' and insert '(11) or (11A)'.

No. 24, in page 9, line 3, leave out 'and'.

No. 25. in page 9, line 13, leave out 'or other loan to'. —[Mr. Ian Stewart.]

Clause 8

PROPORTION OF LIABILITIES TO BE IN FORM OF SHARES

Amendments made: No. 26, in page 9, line 16, leave out 'or otherwise lent to'.

No. 27, in page 9, line 22, leave out 'or loans'.

No. 28, in page 9, line 29, leave out 'loans and'.

No. 29, in page 10, line 9, leave out 'loans or' — [Mr. Ian Stewart.]

Clause 9

INITIAL AUTHORISATION TO RAISE FUNDS AND BORROW MONEY

Amendments made: No. 30, in page 10. line 20, leave out 'or otherwise borrow'.

No. 31 in page 11, line 38, after first 'the', insert 'issue of shares'.

No. 32, in page 12, line 9, after second 'time' insert
'(and notwithstanding any pending appeal)'.

No. 33, in page 12, line 16. at end insert—
'(9A) On granting authorisation to a building society under this section the Commission shall inform the central office of the fact and the central office shall record that fact, and the date on which the authorisation was granted, in the public file of the society.'.

No. 34, in page 12, line 18, leave out 'or otherwise borrows'.

No. 35, in page 13, line 3, after third 'the', insert `qualifying'.

No. 36, in page 13, line 9, after second 'the', insert `qualifying'.

No. 37, in page 13, line 10, at end insert '; and
qualifying deferred shares" means deferred shares other than deferred shares which, by virtue of regulations under section 43(5), are not included in capital resources aggregated with reserves for the purposes of the first criterion in subsection (3) of that section.'.

Clause 10

ADVANCES SECURED ON LAND

Amendments made: No. 38, in page 13, line 19, leave out from 'land")' to end of line 20 and insert 'secured by'.

No. 39, in page 13, line 37, at end insert
'and a reference to the land which is to secure an advance or on which an advance is secured is a reference to the estate or interest or the heritable security which constitutes the basic security.'.

No. 40, in page 13, line 37, at end insert—
'(2A) The power to make an advance secured on land includes power, subject to the restriction imposed by subsection (2B) below, to make, as a separate advance, an advance which is to be applied in or towards payment of the deposit for the purchase of the land (in this Part referred to as "an advance for a deposit for the purchase of land.")
(2B) The restriction referred to is that an advance for a deposit for the purchase of land must not exceed 10 per cent. of the total amount to be paid for the purchase of the land.'.

No. 41, in page 13, line 38. leave out 'as made on the security of and insert
'for the purposes of this Act as secured by'.

No. 42. in page 14, line 31, at end insert 'and'.— [Mr. Ian Stewart.]

Dr. McDonald: I beg to move amendment No 414, in page 14, line 35, at end insert—
'(6A) A building society, once it has advanced money on the security of an equitable interest in land in England and Wales or Northern Ireland, may not sell on that loan without the express permission of the borrower which shall be obtained according to a code of practice which shall be agreed between all the building societies and which shall have received the approval of the Commissioners.'.
The purpose of this amendment is to deal with the growing market and to ensure that the borrower's interests are protected. When I raised this issue on Second Reading, the Minister said that it would be up to the
borrower to ensure that the terms of a second mortgage were suitable." [Official Report. 19 December 1985; Vol. 89, c. 602.]
I think that he said that because he did not actually hear what I said. I hope that it was for no other reason. Of course, I was talking about the growth of the secondary mortgage market and urging that the borrower's interests there should be protected. Since Second Reading and our debates in Committee, I know that the Minister has taken a great interest in this issue and has encouraged his hon. Friend the Minister for Housing, Urban Affairs and Construction to propose the need for a code of practice. A draft code of practice has been drawn up by the Building Societies Association. I hope that a final draft will be forthcoming.
It is worth saying something about the need for protection as this is a new market in the United Kingdom. It has attracted interest in United Kingdom mortgages from investors as far afield as Canada and Japan. Part of the attraction lies in the fact that, at the moment, the rate of default is extremely low, although that rate has increased partly because of increasing unemployment and partly because of the continuing high rate of divorce.
9.15 pm
Like many other newspapers, The Times recently carried an article on the growth of the secondary mortgage market, which said:
To reassure borrowers the new market will have to develop guarantees that the responsibility for, say, setting interest rates and foreclosing on people who do not repay will remain with an identifiable lender and not be sold along with the underlying asset.
That is vital. I am sure that we have all corresponded with a building society about a mortgagee who is in arrears and been able to negotiate different terms for repayment to tide the borrower over a period of difficulty. That has often been easy because the branch is local and the manager knows the borrower. If mortgages are sold on and can be purchased by a foreign investor or a large finance company, however, that relationship may no longer exist. It does sometimes. It depends on what type of arrangements have been made by the purchaser of bundles of mortgages.
The matter requires a code of practice even more now than when we raised the issue in Committee and on Second Reading. Since then, the Government have announced that, for the first six months in which somebody is in receipt of supplementary benefit, payment of mortgage interest by the DHSS will be halved. The Opposition have had much to say about that. Just when people need most help and have very low incomes— they can build up substantial mortgage arrears over only six months— mortgage interest payments are halved. They may be unable to make up those arrears easily, even when the DHSS restores full interest payments if they continue to be in receipt of benefit. Bearing in mind the Government's change of policy, a proper code of practice is even more necessary. That is another issue on which consumers support the need for a code.
The Times article says that the fears of a new breed of ruthless investor entering the market who is willing to foreclose at the drop of a hat
were highlighted when Barclays canvassed the opinions of its borrowers on the sale of their mortgages and received an unequivocal thumbs down to the idea late last year.
The Government are pursuing a voluntary code. That is an important step forward. The amendment proposes that the code should be compulsory and be agreed between the Building Societies Commission and the building societies. That would ensure that nobody could escape from the obligations, in a changing market, that they have taken on towards a borrower. It would also ensure that borrowers' interests are properly protected, even when their mortgages are sold in the United Kingdom or to foreign investors.
The matter is one of social concern. We must ensure that borrowers' interests are protected, especially when they hit hard times. They must be able to continue to deal with the person who gave them the mortgage.

Sir George Young: In asking the House not to accept the amendment I do not want it to be thought that I ant in any way unsympathetic towards the remarks of the hon. Member for Thurrock (Dr. McDonald). There is a fair degree of unanimity between us. However, as she would be the first to recognise, the amendment would apply only to building societies. As she said, it is not necessarily the building societies which are likely to abuse the ability to transfer a mortgage. She referred to a new type of ruthless

investor coming to the market who might foreclose more easily than building societies. The amendment would not cover the new ruthless investor.
I am convinced that we need a broader approach to the problem which covers all people who loan on mortgages, rather than just building societies. I am therefore not convinced that the amendment represents the best way to proceed.
The hon. Lady may have seen a speech which my "ion. Friend the Minister for Housing, Urban Affairs and Construction made on 8 May. My hon. Friend said that he had great reserations about the selling of existing mortgages unless the borrower gives explicit consent to the sale. He also said that he did not necessarily feel that: the Building Societies Bill was an appropriate vehicle for changes, because any code of practice would apply to all those in the mortgage market, not just the building societies. He went on to say that the Government would be examining with interested organisations the appropriate arrangements to protect the legitimate interests of borrowers while enabling innovation in the mortgage market to bring the full benefit of additional funds for home ownership and wider choice in the types of loan.
Since making that speech, my hon. Friend has asked his officials and officials at the Treasury to discuss the matter with representatives of all those involved in the mortgage market. These discussions have covered the steps that need to be taken to protect the borrowers' interests. My hon. Friend hopes shortly to make an announcement which will be of considerable interest to the hon. Member for Thurrock and to the House as a whole.
The Government share the anxieties of the hon. Lady that ordinary borrowers should be protected in the market in which they play an active part but over which they have no control. We do not believe that it would be helpful to tackle the problem piecemeal. The mortgage market is no longer the exclusive preserve of the building societies. We are at present actively pursuing an initiative which will cover the whole market and examine the need to protect borrowers in the many different areas of the market.
Against that background, I ask the hon. Lady to await my hon. Friend's announcement, which he will make shortly, and not to pursue the amendment.

Amendment negatived.

Clause 11

PRIMARY AND SECONDARY ADVANCES

Amendments made: No. 43, in page 14, line 45, at end insert
'and when an advance may, for those purposes, be treated partly as a class I advance and partly as a class 2 advance'.

No. 44, page 15, line 8, after 'security', insert
`(after deducting from that value any mortgage debt of the borrower to the society outstanding under a mortgage of the land);'.

No. 45, in page 15, line 10, leave out 'by the borrower'
and insert
`which is to secure the advance is outstanding'.

No. 46, in page 15, line 11, leave out 'is outstanding'.

No. 47, in page 15, line 34, leave out `by the borrower' and insert
`which is to secure the advance is outstanding'.

No. 48, in page 15, line 35, leave out 'is outstanding'.

No. 49, in page 15, line 38, at end insert—


(5A) An advance for a deposit for the purchase of land is also a class 1 or class 2 advance according as it is made with a view to the making of a class 1 or class 2 advance secured on the land.
(5B) Advances which would be class 2, and not class 1, advances by reason only that the extent of the residential use of the land is not as to satisfy the requirement in subsection (2)(b) above shall be treated as class 1 advances if and to the extent prescribed by an order under section 12(5A).'. —[Mr. Ian Stewart.]

Clause 12

CLASS I AND CLASS 2 ADVANCES: SUPPLEMENTARY PROVISIONS

Amendments made: No. 50, in page 17, line 35, leave out '(2)' and insert '(3)'.

No. 51, in page 17, line 36, at end insert
, under section 31 of the Tenants' Rights, Etc. (Scotland) Act 1980 or under Article 156 of the Housing (Northern Ireland) Order 1981'.

No. 52, in page 17, line 38, at end insert—
(5A) The Commission, by order in a statutory instrument, may, as respects advances to be secured on land which is to any extent to be used for the residential use of borrowers or persons who are dependants of theirs for the purposes of section 11(2)—

(a)require so much of the amount to be advanced as is determined by or under the order to be treated as a class 1 advance;
(b)specify the circumstances in which and the conditions subject to which advances are to be so treated; and
(c)make such incidental, supplementary and transitional provision as the Commission considers necessary or expedient.

No. 53, in page 18, line 24, at beginning insert 'basic'. —[Mr. Ian Stewart.]

Clause 13

SECURITY FOR ADVANCES: VALUATION AND SUPPLEMENTARY AND RELATED PROVISIONS

Amendments made: No. 389, in page 19, line 21, after 'land', insert
'and any factors likely materially to affect its value or saleability'.

No. 390, in page 19, line 22, leave out 'land'.

No. 391, in page 19, line 40, after 'any', insert 'director, other officer or'.

No. 392, in page 19, line 45, after 'any', insert 'director, other officer or'.

No. 393, in page 20, line 8, after 'any', insert 'director, other officer or'.

No. 394, in page 20, line 12, after 'any', insert 'director, other officer or'.

No. 395, in page 20, line 30, at end insert
'and, for its purposes, a person shall be taken to have a financial interest in the disposition of any land if, but only if, he would, on a disposition of that land, be entitled (whether directly or indirectly, and whether in possession or not) to the whole or part of the proceeds of the disposition.'.

No. 54, in page 20, line 32, leave out from beginning to 'supplementary' in line 34. —[Mr. Ian Stewart.]

Clause 14

POWER TO LEND TO INDIVIDUALS OTHERWISE THAN BY CLASS I OR CLASS 2 ADVANCES

Amendments made: No. 55, in page 20, line 42, leave out from 'that' to end of line 4 on page 21 and insert
'an advance for a deposit for the purchase of land shall, if the purchase is not completed within the period of six months beginning with the date of the advance, be treated after the end of that period as a loan under this section and shall accordingly cease to be a class 1 or class 2 advance'.

No. 56, in page 21, line 4 at end insert—
'(2A) Mobile home loans do not constitute loans under this section.'.

No. 57, in page 21, line 8 after '(4)', insert
'Subject to subsection (5A) below'.

No. 58, in page 21, line 16 after 'section', insert
'or this section and section (Loans for mobile homes)'.

No. 59, in page 21 line 18 after 'as', insert
', in the case of loans under this section.'.

No. 60, in page 21, line 20 at end insert
'and, in the case of loans under this section and section (Loans for mobile homes), as made on different occasions such that loans under this section precede those made under that section.
(4A) Subsection (4) above shall have effect (subject to subsection (5A) below) in a case where a building society has made a loan undersection (Loans for mobile homes) as if it precluded a building society from making a loan to an individual under this section if the principal exceeds—

(a) the limit referred to in paragraph (a) of it; or
(b) the balance referred to in paragraph (b) of it; or
(c) the balance remaining after deducting from the limit imposed by or under subsection (6) of that section the aggregate of any sums outstanding in respect of loans made under that section and under this section by the society to that individual.'.

No. 61, in page 21, line 24 at end insert

'(5A) The limit on loans to any one individual under this section does not apply to an advance for a deposit for the purchase of land which has come to be treated as a loan under this section and accordingly no account shall be taken of it for the purposes of subsection (4) above.'.

No. 62, in page 22, line I leave out from beginning to end of line 17.

No. 63, in page 22, line 19 leave out 'or (11)'. [Mr. Ian Stewart.]

Clause 15

POWER TO HOLD AND DEVELOP LAND AS COMMERCIAL ASSET

Amendment made: No. 64, in page 22, line 38, after 'land', insert 'in the United Kingdom'. [Mr. Ian Stewart.]

Clause 16

PART III POWER TO INVEST IN SUBSIDIARIES AND OTHER ASSOCIATED BODIES

Amendment made: No. 65, in page 24, line 2, leave out from 'may' to end of line 9 on page 25 and insert—

'(a) acquire and hold shares or corresponding membership rights in bodies corporate and form or take part in forming bodies corporate, and
(b) provide bodies corporate in which it holds shares or such rights or to which it is, for the purpose of any power under this section, linked by resolution with any of the following supporting services—

(i) loans of money, with or without security and whether or not at interest,
(ii) grants of money, whether or not repayable.
(iii) guarantees of the discharge of their liabilities, and


(iv) the use of services or property, whether or not for payment;

and in this section "invest" means the exercise of any of the powers conferred by paragraph (a) and "support" means the exercise of any of the powers conferred by paragraph (b) above.

(1A) A building society may invest in or support the following bodies corporate (referred to as "qualifying bodies") but no others, that is to say—

(a) companies or industrial and provident societies,
(b) bodies formed in another member State for the purpose of carrying on in other member States businesses which consist wholly or mainly in lending money on the security of land and do not (where that is not the whole business) include lending on land in the United Kingdom (referred to as "corresponding European bodies"), and
(c) bodies corporate (whether or not falling within paragraph (a)or (b)above) designated as suitable for investment and support or for support for the purposes of this section by an order (referred to as "a designation order") made by the Commission with the consent of the Treasury.

(1B) A designation order may—

(a) designate a particular body or designate descriptions of bodies corporate,
(b) make different provision for different descriptions of building society,
(c) Determine, or provide for the determination under the order of, the extent to which. the purposes for which, and the condition subject to which, investment or support is permitted, and
(d) make such transitional and consequential provision as the Commission considers necessary or expedient.

(1C) Subject to subsection (1D) below, a building society shall not invest in or support a qualifying body so as to enable that body on its own account, in the United Kingdom, to—

(a) lend money to members of the public on the security of land by loans corresponding to advances secured on land,
(b) accept deposits of money otherwise than in such circumstances that their acceptance would not constitute its business a deposit-taking business or in the course of or for the purposes of providing estate agency services under section 32;

but, subject to that, it may invest in or support a qualifying body so as to enable that body to carry on any activity which it is within the powers of the society to carry on but, subject to subsection (1D) below, no others.

(1D) In the case of a qualifying body designated, or included in a description of bodies designated, by a designation order a building society may also invest in or support it for such purposes as are permitted by or under the designation order.

(1E) Subject to subsection (1F) and (1G) below, a building society shall not invest in or support a qualifying body whose objects enable it—

(a) to carry on activities which are outside the powers of the society,
(b) to invest in other bodies corporate, or
(c) to support other bodies corporate;

but this does not imply that it is unlawful for the society to complete the performance of any contractual obligations lawfully incurred in providing a supporting service.

(1F) Subsection (1E) above shall not operate so as to restrict a building society's powers under this section in relation to a corresponding European body.

(1G) Subsection (1E) above shall not prevent a building society from investing in or supporting a qualifying body—

(a) if that body is, in relation to the society, a designated body and the investment or support is made in accordance with the designation order,
(b) if, not being a body whose objects enable it to carry on activities outside the powers of the society, the investment or support is made or given with the consent of the Commission and subject to any conditions specified in the instrument giving the consent, or
(c) for a period of three months pending the alteration of the objects of that body.

(1H) For the purposes of any power conferred by this section a body corporate is "linked by resolution" to a building society

if the board of directors of the society has passed a resolution making that power exercisable in relation to that body and the resolution is in force.'.

No. 66, in page 25, line 10, leave out from first 'in' to `is' in line 12 and insert
'or support a corresponding European body'.

No. 67, in page 25, line 14, at end insert
; but the cessation of its availability by virtue of this subsection does not require the disposal of any property or rights.'.

No. 68, in page 25, line 22, leave out `(5)(b)' and insert `(1H)'.

No. 69, in page 25, line 24, after '4', insert (3)'.

No. 70, in page 25, line 29, leave out '(5)(b)' and insert '(1H)'.

No. 71, in page 25, line 31, after '4' insert `(3),'.

No. 72, in page 25, line 33, at end insert—
'but subject to subsection (9A) below.
(9A) No rescinding resolution shall be registered without the consent of the Commission.'.

No. 73, in page 25, line 38, leave out 'at any time'.

No. 74, in page 25, line 40, leave out '(4)(c)' and insert `(1A)(c).

No. 75, in page 26, line 1, at end insert—
`company" means a company within the meAning of the Companies Act 1985 or the Companies Act (Northern Ireland) 1960;'

No. 76, in page 26, line 5, at end insert—
'"deposit" and "deposit-taking business" have the same meaning as in the Banking Act 1979;
industrial and provident society" means a society registered under the Industrial and Provident Societies Act 1965 or, in Northern Ireland, the Industrial and Provident Societies Act (Northern Ireland) 1969;'.

No. 77, in page 26, line 7, leave out from beginning to end of line 12.

No. 78, in page 26, line 18, leave out from 'one' to end of line 19 and insert
`to which the society is linked by resolution;'.—[Mr. Ian Stewart.]

Clause 18

COMMERCIAL ASSET STRUCTURE REQUIREMENTS FOR BUILDING SOCIETIES

Amendments made: No. 79, in page 28, line 5, leave out from beginning to 'not' in line 7 and insert
`direct that subsection (2) or (3) above shall have effect during the currency of the order as if such percentage as is specified in the order were substituted for the percentage specified in that subsection'.

No. 80, in page 28, line 10, leave out from 'may' to end of line 12 and insert—

'(a) divide class 3 assets into sub-classes for the purposes of the order by reference to the provision of or made under this Part from which they arise;
(b) subject to subsection (5A) below, prescribe different limits for different sub-classes; and
(c) make such transitional provision as appears to the Treasury to be necessary or expedient;

and any reference in this Act to a limit for a class of commercial assets shall, if a limit is in force under subsection (4) above for any sub-class of class 3 assets, be construed as including a reference to the limit for that sub-class.

(5A) No order under subsection (4) above shall prescribe as a limit for a sub-class of class 3 assets a percentage of total commercial assets less than the percentage in force immediately before the making of the order for that sub-class or, if the subclass is created by the order, for class 3 assets generally.'.

No. 81, in page 28, line 35, leave out 'and'.

No. 82, in page 29, line 9. leave out from 'limits' to first 'the' in line 10 and insert
'in force under this section'. — [Mr. Ian Stewart.]

Clause 19

LIQUID ASSETS

Amendment made: No. 83, in page 29, line 37, after `scale', insert 'of the business'—[Mr. Ian Stewart.]

Clause 21

POWER TO HEDGE ASSET POSITION

Amendments made: No. 415, in page 31, line 13 after 'may', insert
'effect contracts of a prescribed description'.

No. 416, in page 31, line 15, leave out from 'business' to end of line 17.

No. 417, in page 31, line 25, at end insert 'and'.

No. 418, in page 31, line 27, leave out 'financial futures contracts and'.

No. 396, in page 31, line 30, after '(3)', insert
'Except as provided under subsection (3A) below,'.

No. 397, in page 31, line 33, at end insert—
`(3A) The Commission, with the consent of the Treasury, may by order provide that subsection (3) above shall not have effect, as regards prescribed powers, in relation to prescribed descriptions of building societies.'.

No. 398, in page 31, line 37, leave out '(2) above' and insert
'(2) or (3A) above—

(a) includes power to make such transitional provision as the Commission considers necessary or expedient, and
(b)'.

No. 399, in page 32, line 2, leave out 'above' and insert
'or (3A) above, as the case may be'. —[Mr. Ian Stewart.]

Clause 24

POWER TO LEVY CONTRIBUTIONS AND TO BORROW MONEY IN EVENT OF INSOLVENCY

Amendments made: No. 84, in page 34, line 2, after '1985', insert
'or section 258 of the Companies Act Act (Northern Ireland) 1960.'.

No. 85, in page 35, line 9 leave out 'or otherwise lent to'.

Clause 25

PAYMENTS TO INVESTORS

Amendments made: No. 86, in page 36, line 14, leave out 'three quarters' and insert '90 per cent. '.

No. 87, in page 36, line 33, leave out
'or otherwise lent money to'.

No. 88, in page 36, line 37, leave out 'or otherwise lent to'.

No. 89, in page 36, line 40, after 'instrument', insert—
'(a) amend subsection (2) above so as to substitute for the percentage for the time being specified in that subsection such other percentage as may be specified in the order; and
(b)'.

No. 90, in page 36, line 43, leave out from first 'order;' to end of line 45.

No. 91, in page 36, line 45, at end insert—
'(6A) No order shall be made under subsection (6) above unless a draft of it has been laid before, and approved by a resolution of, each House of Parliament.'.

No. 92, in page 37, line 5, leave out 'or loan'. —[Mr. Ian Stewart.]

Clause 26

LIABILITY OF INSOLVENT SOCIETY IN RESPECT OF PAYMENTS BY BOARD

Amendments made: No. 93, in page 37, line 43, leave out 'or loans'

No. 94, in page 38, line 10, leave out 'or loans'.

No. 95, in page 38, line 23, leave out 'or loans'.

No. 96, in page 38, line 27, leave out 'or loans'.

No. 97, in page 38, line 29, leave out 'or loan'.

No. 98, in page 38, line 33, leave out 'or loans'.—[Mr. Ian Stewart.]

Clause 27

REPAYMENTS IN RESPECT OF CONTRIBUTIONS

Amendments made: No. 99, in page 40, line 23, leave out 'received' and insert 'retained'.

No. 100, in page 40, line 24, leave out from 'amounts' to 'those' in line 25 and insert
'not exceeding the contributions due from'.

No. 101, in page 40, line 28, leave out
and if the Board does so'

and insert—
'(4A) If the Board makes appropriations under subsection (4) above,'

No. 102, in page 40, line 30, after first 'societies', insert
'in or towards discharge of its debts to them'. —[Mr. Ian Stewart.]

Clause 29

VOLUNTARY SCHEMES

Amendments made: No. 103, in page 41, line 31, leave out
'or otherwise lent money to'.

No. 104, in page 42, line 4, leave out 'or otherwise lent to'.

No. 105, in page 43, line 14, leave out 'or loans'.—[Mr. Ian Stewart.]

Clause 32

POWERS TO PROVIDE FINANCIAL SERVICES OR SERVICES RELATING TO LAND

Amendment proposed: No. 424, in page 43, line 40, after 'Part', insert '1A or' —[Mr. Donald Thompson.]

Mr. Deputy Speaker: With this it will be convenient to take the following amendments: Government No. 425.
No. 106, in clause 33, page 45, line 3, leave out 'a class 1' and insert 'any'.
No. 107, in line 6, at end insert—
'(1 A) Where, in relation to subsection (1) above, any insurance or other financial services are provided other than by the Society or its subsidiary, the Society or its subsidiary may not make any charge or increase in the mortgage rate in respect of that service.'.
No. 108, in line 18, at end insert—
'(3A) Where a Society or its subsidiary offers to provide a service in relation to an advance to any person, the Society or its subsidiary shall inform that person in writing that he is free to make his own arrangements to obtain that service.'.
No. 109, in line 19, leave out 'or (2)' and insert '(1A), (2) or (3A)'.
No. 110, in line 24, leave out '(2)' and insert '(1A), (2) or (3A)'.
Government Nos. 311, 312, 426, 313 and 314.
No. 315, in schedule 8, page 182, line 30, at end insert—
Insurance Services
8A. The power to provide insurance services is available only to a Building Society or its subsidiary which is for the time being registered or listed under the Insurance Brokers Registration Act 1977.'.
Government Nos. 316 to 320, 403, 428, 322 and 323.

Mr. Robert McCrindle: I begin by declaring an interest as parliamentary adviser to the British Insurance Brokers Association, a body of which I hope the insurance subsidiaries likely to be set up as a result of this legislation will in due course become members. In the meantime, the purpose of amendments Nos. 106 to 110 and amendment No. 315 is to establish a basis for the insurance services likely to be provided by the insurance subsidiaries stemming from this legislation that is as fair as can reasonably be attained.
The effect of amendment No. 315 is that building societies wishing to become insurance intermediaries would have to be registered or listed under the Insurance Brokers Registration Act, which would require them to observe the standards laid down in that Act, to which those now trading under the title of insurance brokers have to subscribe.
Paragraph 4.16 of the Green Paper, Cmnd. 9316, made the following proposal:
Any further exterision of building society activities … would need to be subject … to the standards of behaviour expected of the insurance services industry.
Paragraph 4.19 stated that those new activities
would be subject to the regulatory regime for the particular service",
which for insurance broking currently takes the form of the Insurance Brokers Registration Act 1977. Regrettably, that proposal has not been translated into the Bill. In the meantime, the conduct of insurance subsidiaries of building societies in so far as it relates to life and investment assurance is being taken care of as the Financial Services Bill proceeds through the House, but other insurance in which the building societies have traditionally dealt — for example, householders' comprehensive, buildings and contents and related forms of insurance—will remain unregulated unless amendment No. 315 or something very similar is absorbed into this Bill.
A concern that I have frequently heard expressed is that because building societies have a high reputation among the public there may be a tendency to assume that as there is undoubted expertise in house purchase and mortgage arrangement in the smallest branch office of a building society the same level of expertise will be available on insurance matters, but that does not necessarily follow. It is questionable how much training building society managers can claim in this area. From my own experience, I know that in a number of areas building society managers are not always able to assist in the way that could reasonably he expected of people registered under the Insurance Brokers Registration Act. It is a question not just of arranging an insurance and choosing the correct market, but of dealing with claims as and when they arrive. Under the present set-up, building societies cannot necessarily be expected to have that expertise.
9.30 pm
If the amendment were acceptable to the Government, the insurance subsidiaries of building societies would have

to register under the 1977 Act and be prepared to conform to its standards. That would be a means of directing to the consumer an implication of competence which would greatly strengthen consumer protection.
In regard to amendment No. 106, clause 33 prohibits a building society from making the provision of a primary advance conditional on the use by a borrower of other services by the society. The effect of the amendment would be to extend that prohibition to any advance or loan. The provision in clause 33 that a building society cart no longer insist on the borrower insuring his house through the society does not go far enough. The prohibition should apply also to second mortgages. For example, under the Bill as it stands, if a borrower obtained an unsecured loan of, say, £5,000 to buy a car, the society could insist that he insured that car with an insurer of its choice through its insurance department or subsidiary. This is an area of possible conflict to which the House should give attention in the discussion of this part of the Bill.
The reason for amendment No. 107 is to prevent a building society charging the borrower when he wishes to make his own arrangements rather than use the services offered by the society. Following pressure by the Office of Fair Trading, building societies permit the use of the client's own insurance intermediary, but one of the less reputable practices of many building societies over the past few years has been to charge for the privilege. Some extremely well-known societies do so. For example, the Cheltenham and Gloucester charges £25 to enable a borrower to make his own insurance arrangements. The Newcastle charges £25. The Portsmouth charges £15 per annum and if a borrower insists on making his own insurance arrangements it increases the mortgage repayment rate. The Skipton charges £25. The Town and Country charges £23. Many hon. Members will question the morality of having to pay for the privilege of seeking the best insurance market for one's personal insurance needs.
The effect of amendment No. 108 would be that a building society would have to make it clear, whether in the application form or elsewhere in its literature., that the borrower is free to make his own arrangements for insurance or other financial services, if he so wishes. No doubt some societies draw that freedom to the attention of borrowers, but a great many do not. I have with me literature from the Halifax, the Abbey National, the Nationwide and the Cheltenham and Gloucester, and none of it states clearly and specifically that there is no obligation to place the insurance relevant to a mortgage through the agency of the building society.
As we come close to the end of the consideration of this important legislation in this Chamber, the House should give its attention to these extremely important matters. The Government may have better ideas about how to achieve the same objective. I hope that the Minister will recognise that what is sought by insurance intermediaries is fair competition. It would be an exaggeration if I said that existing insurance intermediaries welcomed the prospect of building societies engaging in their sphere of commercial activity, but if there is to be such competition —as must be accepted—it should be fair.
I hope that I have been able to draw to the attention of the House a few areas in which I contend that the competition is not fair. Therefore, I hope that my hon.


Friend the Minister will be able to indicate to me that he is prepared to accept the amendments or in some other way to achieve the objectives that underlie them.

Sir George Young: Before I deal with the amendments of my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) I shall deal briefly with Government amendment No. 311, which gives the building societies wider powers to set up and run personal and money purchase occupational pension schemes. The amendment gives effect to the proposals which my hon. Friend the Economic Secretary to the Treasury outlined on 7 May, and will ensure that building societies can play a full part in the provision of personal pensions.
Amendment No. 315 requires building societies or their subsidiaries to register under the Insurance Brokers Registration Act 1977 and to become subject to regulation by the council. My hon. Friend's amendment recalls one which he tabled in Committee on the Financial Services Bill. That amendment would have required all insurance agents who sold general insurance, other than company representatives, to register with the Insurance Brokers Registration Council. I hope that my hon. Friend will not be greatly disappointed when I say that the Government are no more disposed towards amendment No. 315 than they were to that amendment, for much the same reasons.
We start from the general proposition that there should be no prohibitions restricting competition by limiting those who can take up any given area of commercial activity. Nor should we impose statutory burdens on businesses, unless there are good reasons for them. A case must be made for the sort of changes that my hon. Friend proposes, and the Government believe that the case has not been made.
As my hon. Friend recognised, in the case of life assurance, building societies, like other intermediaries, will be regulated under the legislation. I do not think that there is a point between us there. On general insurance, the original proposals in the Green Paper have not been implemented. The larger societies may well choose in future to form subsidiaries, registered with the IBRC, as the clearing banks have done, but to require such registration does not seem justified, and the Financial Services Bill Committee was not persuaded that there were problems in general insurance which could be solved only by statutory regulation. Still less am I aware that there is a real problem with the building societies. As my hon. Friend will know, we are promoting talks within the industry with a view to improving self-regulation on the basis of consensus.
We are not persuaded that all insurance intermediaries should have to register with the council, nor do we think that the building societies should be singled out and made an exception to that view. That would be to discriminate unfairly against them.
The building societies probably could not qualify. They would not necessarily have qualified or experienced insurance brokers on the board, so they would have to set up subsidiaries to register. That may be possible for larger building societies, but for smaller and medium-sized societies there would be considerable trouble and expense in dividing operations in that way. Some may simply decide not to offer insurance services, which would be disappointing, because competition would be reduced and

the consumer would be deprived of a convenient outlet for an important service. Neither consequence would be welcome to the Government, which is why we are inclined to resist amendment No. 315.
Amendment No. 106 seeks to extend the prohibition on tying services from cases where the societies are making a class 1 advance to cases where they are making any category of advance. As my hon. Friend knows, clause 33(1), which prohibits services from being tied to a class 1 loan, was the subject of a great deal of debate in Committee. The provision was inserted to buttress the general competition and fair trading legislation in view of the dominant position of building societies in the first mortgage market. In Committee it was argued strongly that it was discriminatory to apply prohibitions to building societies and not to other mortgage finance institutions. My hon. Friend's amendment would extend that disparity of treatment to cover services related to any loan, not just a loan on a first mortgage.
I do not think that this extension can be justified in its sole application to building societies where they do not have the dominant position in respect of second mortgages or unsecured lending. If one went down that path, it would be discriminating against building societies entirely without grounds for doing so. For that reason, the Government are not disposed to advise the House to accept the amendment.
While it is important that first mortgage borrowers should be protected by an anti-tying provision, I can see the force of the argument that it is wrong to provide a statutory obligation of that sort only in respect of building societies. My hon. Friend has said that he is prepared not to bring into effect this provision if societies adopt an effective code of practice which contains such an obligation. In a recent speech to the annual conference, the chairman of the Building Societies Association said that the association was now prepared to consider such a code of practice if the clause were not activated. The Government welcome that statement. The terms of such a code might be a more appropriate place for these additional protections, and I hope that the societies and the BSA will now give the matter full consideration. I am sure that they will bear in mind what my hon. Friend has said.
Amendment No. 108 would require a society to point out in writing to a borrower that he can make his own arrangements to obtain a service in connection with a loan. That might be a little bureaucratic. It would impose a requirement applying, not just in connection with a first mortgage loan, but with any advance. It would involve a society in the rather cumbersome and costly process of writing to any borrower to whom it wished to provide a service. Again in Committee there was a complaint that the existing provisions unjustifiably discriminated against societies and this would be a further step in what would be regarded as discriminatory treatment. Therefore, the Government are not minded to accept this amendment either.
My hon. Friend mentioned a number of societies which imposed charges on their members where they decided to opt out. I am sure that his listing of the societies will have had a salutary effect on injecting a greater degree of competition. I do not think that it would be right to ban that sort of charge. There are cases where a society would face additional administrative costs through a borrower going elsewhere and some charge would be legitimate. For example, if a borrower insured the property with an


outside insurance company, the society, as lender, would have to check the policy to safeguard its security. That would be an extra expense for the society, and it seems legitimate for that extra cost to be reflected in the charges that it makes.
The answer to my hon. Friend lies in an increasingly competitive mortgage market where building societies have to react to competition and remove these discriminatory charges. Indeed, removal of the differential on endowment mortgages is a recent example of such competition working and of the building societies removing a differential charge. Therefore, I hope that my hon. Friend will not find it discourteous if I advise the House to reject his amendments. I feel that he may have been aware in advance that the Government were not able to go down this path.

Mr. McCrindle: It comes as no major surprise that the eloquence to which my hon. Friend the Parliamentary Under-Secretary paid due testimony did not persuade him to accept even one, let alone the total number, of the amendments that I tabled. At least in this respect the Government are proving consistent, because that was the response I received when I proposed a similar amendment in Committee on the Financial Services Bill. Nevertheless, I am mildly encouraged by one or two of the remarks made by my hon. Friend in asking the House to reject the amendments. I cannot but feel that when he tries to justify the imposition of a charge by a society for allowing a consumer freedom of choice to arrange his insurance in the best market available he is flying in the face of the competitive society about which I believe he and I are united in many other respects.
I hope that my hon. Friend is right that the names of the societies that I read out—by no means an exhaustive list—will be shamed into accepting that the borrower must be given a far greater freedom of choice without the imposition of a charge. I am fortified in the knowledge that when the Office of Fair Trading has turned its attentions to this matter in the past it has considered that to be an anti-competitive practice.
If I have achieved nothing more this evening, I hope that I have moved closer to the time when there will be greater freedom for a borrower to arrange his insurances in the best available market without the imposition of a charge.
9.45 pm
Before I finally accept defeat, I wonder whether my hon. Friend can say something about Government amendments Nos. 312 and 316. They are not entirely clear in their import. Can my hon. Friend say whether I am correct in suspecting that the amendments are calculated to enable building societies to move into commercial insurance, as distinct from covering domestic arrangements, such as the contents of a house, a house, and even a motor car that is purchased by way of an unsecured loan? I do not suggest that the Abbey National or the Halifax will be prone to go into the aviation or marine markets once the legislation appears on the statute book.
In the interests of achieving the fair competition to which I referred and to which my hon. Friend responded, it would be helpful if we were a little clearer in our minds that the area of insurance activity that it is envisaged the building societies will move into more forcefully than they have done in the past is that part of the insurance market that relates primarily to what I shall call domestic risks.

Perhaps my hon. Friend can clarify the meaning of amendments Nos. 312 and 316, and confirm that the area of insurance activity he envisages is as I have suggested.

Sir George Young: I hope that I can give my hon. Friend the Member for Brentwood and Ongar (Mr. McCrindle) the assurances that he seeks. Amendment 312 involves no change in policy. It simply clarifies what is involved. It does two things. First, it makes it clear that building societies can act as agents either for the person seeking the insurance or the person providing it. In other words, the society can act either as an independent broker or as a tied agent for a company. Under the requirements that will be imposed for financial services authorisation, it will be necessary for building societies to make it clear in which capacity they are acting.
Secondly, the amendment makes it clear that building societies can offer advice. Many society customers will be looking to the society for advice on their insurance needs, whether the society is an independent intermediary or a tied agent. Schedule 1 to the Financial Services Bill provides separately for the function of advising on investment business and arranging for its provision it is advisable for consistency and the avoidance of doubt to make it clear that the power available to building societies extends to both.
Amendment No. 316 provides that a society's insurance services must be provided primarily, rather than exclusively, to individuals and corporate borrowers within class 2. We do not see that as a means for building societies dramatically to change the nature of the insurance business. However, a building society may acquire an insurance broking business which has some small business customers on its books. That would not be possible without the amendment.
Likewise, someone with a building society loan on his house, who arranged the insurance on it through a society, may wish to arrange insurance in respect of his business. Instead of forcing societies to turn people away, which would make little competitive sense, it would be sensible to give them the flexibility to have a small amount of corporate business on their books. That is why the Government have responded in that way. In the light of what my hon. Friend has said, I accept that we need to watch to ensure that the nature of the amendment is not abused and that the building societies do not move to commercial insurance broking in a big way.

Mr. McCrindle: My hon. Friend's comments were helpful as far as they went. My hon. Friend used the word "small" twice in his response to my concerns about amendment No. 316. He talked about small business customers and later a small amount of corporate business. I am not aware that the word "small" can be defined in legislation. Indeed, it has clearly not been defined in the Bill. What would my hon. Friend consider to be a small business? What would he consider to be a small amount of business insurance in relation to the total that a building society's insurance subsidiary might transact?

Sir George Young: In seven years as a Minister I have learnt not to give off-the-cuff advice on rather complicated legal questions. But the commission set up to monitor the building societies and the use of the powers will no doubt be interested in what my hon. Friend has said and will keep a close watch on it.
The legislation says that the societies' insurance services must be provided primarily rather than exclusively to individuals and corporate borrowers within class 2. We want the building societies to continue to provide a personal service to people who buy their houses, but, affixed to that, those people may run small businesses and may want to take out their insurance with the building society that insures their home. Without the amendment, building societies would not be able to offer that service.

It is sensible to make that exemption, and that is the object of the amendment. I am reluctant to go further than that, but the commission and the Government will be keeping a watch on this provision to ensure that it is not abused.

Mr. Deputy Speaker: The House has been debating Government amendment No. 424, so there is no need for the hon. Member for Brentwood and Ongar (Mr. McCrindle) to withdraw his amendments which have been spoken to but not moved.

Amendment agreed to.

Amendment made: No. 425, in page 44, line 21, at end insert 1A'.—[Mr. Ian Stewart.]

Clause 33

PROHIBITION ON LINKING SERVICES

Amendment made: No. 111, in page 45, line 27, leave out subsection (6).—[Mr. Ian Stewart.]

Clause 34

POWERS IN EVENT OF BREACH OF LIMITS ON CERTAIN ASSETS AND LIABILITIES

Amendments made: No. 112, in page 45, line 38, leave out 'or otherwise lent to'.

No. 113, in page 46, line 4, at end insert—
'(the limits referred to in paragraphs (a), (b), (c) and (d) above being referred to in this section as "the relevant statutory limits")'.

No. 114, in page 46, leave out lines 12 to 16 and insert—

'(a) that the assets and liabilities of the society will not, by the end of the period of 12 months beginning with the date of the direction, exceed the relevant statutory limits as applied at the last day of that period, and
(b) that they will not thereafter exceed the relevant statutory limits.

(3A) For the purpose of applying the relevant statutory limits as directed by subsection (3)(a) above—

(a) in the case of a limit which operates by reference to the end of a financial year of a society, the financial year of the society shall be treated as ending on the day as at which the limits are to be applied; and
(b) the assets and liabilities of the society shall be determined by reference to a balance sheet prepared by the directors by reference to that day and sent to the Commission within the period of three months beginning with that day;

and section 75(4) shall apply in the event of a default in complying with this provision as it applies in the event of a default in complying with subsection (2) of that section.'.

No. 115, in page 46, line 19, leave out paragraph (a) and insert—
'(a) within the period of six months beginning with the date of the direction, to submit to its members for their approval at a meeting or by ballot the requisite transfer resolutions for a transfer of the business of the society to a company under section (Transfer of business to commercial company); and'.

No. 116, in page 46, line 23, at end insert 'or ballot'.

No. 117, in page 46, line 28, leave out paragraph (b) and insert—
'(b) within the period of six months beginning with the date of the direction, to submit to its members for their approval at a meeting or by ballot the requisite transfer resolutions for a transfer of the business of the society to a company under section (Transfer of business to commercial company);'.

No. 118, in page 47, line 7, leave out subsection (7) and insert—
'(7) Where a meeting or ballot is held, in pursuance of a direction under subsection (4) or (5) above, for the purpose of voting on the requisite transfer resolutions, then—

(a) if the resolutions are agreed to and the confirmation of the transfer by the Commission is obtained, the society shall proceed under section (Transfer of business to commercial company) to transfer its business to a successor company;
(b) if either resolution is disagreed to, the society shall notify the Commission of that fact as soon as it is practicable to do so.'.

No. 119, in page 47, line 33, leave out from `to' to end of line 34 and insert

'submit to members the requisite transfer resolutions.'.

No. 120, in page 47, line 36, leave out from 'or' to end of line 37 and insert
`submit to members the requisite transfer resolutions,'.

No. 121, in page 47, line 41, leave out paragraph (e) and insert—
'(e) to agree to the requisite transfer resolutions submitted to the members in pursuance of subsection (4) or (5) above, or'.

No. 122, in page 48, line 1, leave out paragraph (f) and insert—
'(f) where it has agreed to the requisite transfer resolutions to proceed under section (Transfer of business to commercial company) to transfer its business to the successor company,'.

No. 123, in page 48, line 6, at end add—
'(11) In this section "confirmation", "the requisite transfer resolutions" and "transfer" have the same meaning as in section (Transfer of business to commercial company).'.—[Mr. Ian Stewart.]

Clause 35

POWERS IN EVENT OF BREACH OF LIMITS ON ASSETS OR LIABILITIES OR ABUSE OF PURPOSE OF BUILDING SOCIETY

Amendments made: No. 124, in page 48, line 33, leave out first 'business' and insert `action'.

No. 125, in page 48, line 34, at end insert—
'(3A) Where the High Court makes an order under subsection (2) above, the Commission shall give a copy of it to the central office and the central office shall keep the copy in the public file of the society.'.—[Mr. Ian Stewart.]

Clause 36

POWER TO DETERMINE BUILDING SOCIETY'S POWERS

Amendment made: No. 126, in page 50, line 32, after `exercise', insert or purported exercise,'.—[Mr. Ian Stewart.]

Clause 37

THE DETERMINATION: NOTIFICATION, EFFECT, APPEAL

Amendments made: No. 127, in page 51, line 22, leave out 'materially'.

No. 128, in page 52, line 16, leave out 'or wrong'. —[Mr. Ian Stewart.]

Clause 38

POWER TO MAKE PROHIBITION ORDERS

Amendments made: No. 129, in page 52, line 44, leave out 'by means' and insert
'or otherwise in its possession by virtue'.

No. 130, in page 52, line 44, at end insert—
'(2A) A disposal of assets in pursuance of a prohibition order shall vest the assets in the transferee but without prejudice to any claim against the society by a person who had an interest in the assets.'.

No. 131, in page 54, line 3, at end insert—
`(10A) The requirement of subsection (10) is satisfied by serving a copy on each director whose appointment has been officially notified and the non-receipt of a copy by a director or the chief executive does not affect the validity of the direction.'.

No. 132, in page 54, line 4, after '(11)', insert
`Subject to subsection (11A) below,'.

No. 133, in page 54, line 5, at end insert—
'(11A) The Commission may suspend or revoke a prohibition order so far as it relates to an asset the disposal of which appears to it, on the application of the society, to be impracticable.'. —[Mr. Ian Stewart.]

Clause 39

POWER TO DIRECT APPLICATION TO RENEW AUTHORISATION

Amendments made: No. 134, in page 55, line 18, leave out third 'the' and insert 'any'.

No. 135, in page 55, line 43, at end insert
'except where section (Rights of appeal) (4) applies'.

No. 136, in page 55, line 43, at end insert—
'(7A) If the Commission refuses to grant authorisation to a building society under this section it shall inform the central office of the fact and the date on which the current authorisation of the society expires; and the central office shall record that date in the public file of the society.'.—[Mr. Ian Stewart.]

Clause 40

IMPOSITION OF CONDITIONS ON CURRENT AUTHORISATION

Amendments made: No. 137, in page 56, line 40, leave out '(6)' and insert '(6A)'.

No. 138, in page 57, line 26, leave out 'but it' and insert '(6A) The Commission'.

No. 139, in page 57, line 32, after second 'time' insert
'(and notwithstanding any pending appeal)'. — [Mr. Ian Stewart.]

Clause 41

REVOCATION OF AUTHORISATION

Amendments made: No. 140, in page 58, line 3, leave out from 'raise' to end of line and insert
'funds or accept deposits of'.

No. 141, in page 58, line 8, leave out 'and annual business statement'.

No. 142, in page 58, line 28, leave out paragraph (d).

No. 143, in page 59, line 18, at end insert—
'(8A) Where a society's authorisation is revoked under this section, the Commission shall inform the central office of the fact and the date on which the revocation takes effect and the central office shall record that date in the public file of the society.'. —[Mr. Ian Stewart.]

Clause 42

REAUTHORISATION

Amendments made: No. 144, in page 59, line 28, at end insert
'expired under section 39(7) or'.

No. 145, in page 59, line 29, leave out '(3)(c) or (d)' and insert 'or (3)(c)'.

No. 146, in page 59, line 33, leave out 'or otherwise borrow'.

No. 147, in page 60, line 1, leave out third 'the' and insert 'any'.

No. 148, in page 60, line 37, at end insert—
'(8A) On granting reauthorisation under this section, the Commission shall inform the central office and the central office shall record that fact, and the date on which the reauthorisation was granted, in the public file of the society.'.—[Mr. Ian Stewart.]

Clause 43

SUPPLEMENTARY: THE CRITERIA FOR PRUDENT MANAGEMENT

Amendments made: No. 149, in page 61, line 11, after `(3)', insert
`For the purposes of this Act'.

No. 150, in page 61, line 26, at end insert 'in their respective positions,'.—[Mr. Ian Stewart.]

Clause 44

POWERS TO CONTROL ADVERTISING

Amendments made: No. 151, in page 63, line 34, leave out 'giving of the'.

No. 152, in page 64, line 16, leave out from 'and' to 'does' in line 19 and insert
'the non-receipt of a notice of the direction by a director or the chief executive.'.

No. 153, in page 64, line 27, leave out from beginning to 'and' in line 31.—[Mr. Ian Stewart.]

Clause 45

POWERS TO AVOID APPARENT ASSOCIATION WITH OTHER BODIES

Amendments made: No. 154, in page 65, line 5, leave out 'investment'.

No. 155, in page 66, line 3, at end insert—
'(6A) Any direction under subsection (2), (5) or (6) above shall be given by the Commission by notice served on the society.'.—[Mr. Ian Stewart.]

Clause 46

POWERS TO OBTAIN INFORMATION AND DOCUMENTS ETC.

Amendments made: No. 156, in page 67, line 7, at end insert—
'(2A) Where the Commission has grounds under section 45(1) for giving a direction to a building society under subsection (2) of that section in relation to another body corporate this section also applies to information, documents or other material, or explanations of matters, which relate to the business of that other body'.

No. 419, in page 68, line 23, leave out from `exceeding' to 'for' and insert '£200'. — [Mr. Ian Stewart.]

Clause 51

INSPECTIONS: SUPPLEMENTARY PROVISIONS

Amendment made: No. 157, in page 79, line 17, leave out 'forward' and insert `send'.—[Mr. Ian Stewart.]

Clause 53

CHIEF EXECUTIVE AND SECRETARY

Amendments made: No. 158, in page 80, line 27, at end insert—
'(2A) The offices of chief executive and secretary of a building society may be held by the same person.'.

No. 159, in page 80, line 38, leave out from first 'the' to 'in' and insert
'date on which he become, or ceased to be, chief executive; and the central office shall record the person's name and the date on which he began to hold, or, as the case may be, ceased to hold office.'.—[Mr. Ian Stewart.]

Clause 54

DIRECTORS: ELECTIONS AND RETIREMENT

Amendments made: No. 160, in page 81, line 23, at end insert
'but cannot be required to cast all or any of his votes'.

No. 161, in page 81, line 24, after 'subsections', insert `(4B),'.

No. 162. in page 81, line 26, at end insert—
'(4A) The rules of a building society may require its directors to retire at a prescribed age without eligibility for re-election or reappointment; and, if the age so prescribed is no greater than the age which is the normal retirement age for the purposes of this section, subsection (5) below shall have no application to the directors of the society.
(4B) If the rules of a building society make the provision authorised by subsection (4A) above, a person who has attained the age so prescribed shall not be eligible to be elected as a director of the society.'.

No. 163, in page 81, line 27, after `(5)', insert
'Except in a case where the operation of this subsection is excluded by subsection (4A) above,'.

No. 164, in page 81, line 33, leave out 'communicated' and insert 'notified'.

No. 165, in page 81, line 34, leave out from 'election' to end of line 35.

No. 166, in page 81, line 39, at end insert
`; and "the compulsory retirement age", for a society whose rules make the provision authorised by subsection (4A) above, means the age so prescribed in its rules.'.

No. 167, in page 81, line 42, after 'hold', insert `beneficially'.

No. 168, in page 82, line 4, leave out subsection (8).

No. 169 in page 82, line 16, leave out 'amount' and insert 'value'.

No. 170, in page 82, line 22, leave out 'falling within paragraph (b) below' and insert
`provided for by paragraph (b) below or rules under section 55(9A)'.

No. 174, in page 82, line 32, after 'age', insert
'or, as the case may be, the compulsory retirement age'.

No. 413, in page 82, line 32, at end insert 'for earlier retirement'.

No. 172, in page 82, line 39, after 'attained', insert '(i)'.

No. 173, in page 82, line 39, after 'age', insert
`or
`(ii) the compulsory retirement age (where that age is less than the normal retirement age)'.

No. 174A, in page 83, line 8, after 'age', insert
`or, as the case may be, the compulsory retirement age.'—[Mr. Ian Stewart.]

Clause 55

DIRECTORS: SUPPLEMENTARY PROVISIONS AS TO ELECTIONS, ETC.

Amendments made: No. 175, in page 84, line 2 leave out from 'require' to end of line and insert—

'(a) in the case of of a society with a qualifying asset holding, more than fifty members, and
(b) in the case of any other society, more than ten members,'.

No. 176, in page 84, line 4, after `54(9)(b)', insert `in order to comply with this section'.

No. 177, in page 84, line 6, leave out from 'to' to 'to' in line 7 and insert
'hold, or have at any time during that period held, shares in the society'.

No. 178, in page 84, line 29, after 'above' insert—

`(a) includes power to make such transitional provision as the Commission considers necessary or expedient, and (b)'.

No. 179, in page 84, line 35, leave out 'send to' and insert 'notify'.

No. 180, in page 84, line 36, leave out 'the notice' and insert 'as'.

No. 181, in page 85, line 3, leave out 'at' and insert in'.

No. 182, in page 85, line 22, leave out from 'matter' to end of line 28 and insert
'or for frivolous or vexatious purposes;
and that subsection shall not be taken to confer any rights on members, or to impose any duties on a building society, in respect of an address which does not relate directly to the affairs of the society.
(8A) The Commission shall hear and determine any dispute arising under subsection (8)(a) above, whether on the application of the society or of any other person who claims to be aggrieved.'.

No. 183, in page 85, line 29, leave out
`Subject to subsection (10) below'.

No. 184, in page 85, line 33, at end insert
'; and an election so conducted shall be void'.

No. 185, in page 85, line 33, at end insert—

`(9A) The rules of a building society, if they provide for the retirement by rotation of its directors, may provide that a person elected to fill a vacant seat on the board must retire at t he annual general meeting at which, in accordance with the rules for retirement by rotation, the seat is to fall vacant.
(9B) Subsection (9A) above applies to any vacancy arising when an elected director ceases to hold office for any reason before the annual general meeting at which (disregarding his age) the seat is due to fall vacant under section 54(10)(a).'.

No. 186, in page 85, line 34, leave out subsections (10) and (11).

No. 187, in page 86, line 22, leave out from first 'the' to 'in' and insert
'date on which he became, or ceased to be, a director; and the central office shall record the person's name and the date on which he began to hold, or, as the case may be, ceased to hold office,'.—[Mr. Ian Stewart.]

Clause 59

RESTRICTION ON LOANS, ETC. TO DIRECTORS AND PERSONS CONNECTED WITH THEM

Amendments made: No. 188, inppage 90, line 10 after `which', insert
', when aggregated with any other relevant loans,'.

No. 189, in page 90, line 17 after 'which', insert
', when aggregated with any other relevant loans,'.

No 190, in page 90, line 24 after 'which', insert
', when aggregated with the value of any other relevant leases or hirings,'.

No. 191, in page 90, line 31 after 'amounting', insert
`, when aggregated with any other relevant payment,'.

No. 192, in page 91, line 15 after 'provided', insert
', when aggregated with any other relevant provision of funds,'.

No. 193, in page 91, line 30 at end insert—
'(9A) In this section—
authorising provision" and "authorised", in relation to a transaction of a description falling within paragraph (a), (b) or (c) of subsection (1) above, mean respectively any provision of subsection (2), (3) or (4) or constituted by subsection (5) above and any transaction or thing done to which that paragraph does not apply or which is not precluded from being done by virtue of that provision; "outstanding", in relation to loans, means outstanding in respect of principal and interest and, in relation to the provision of funds subject to a condition for repayment or discharge of any other liability, means unpaid or undischarged to any extent; "provision of funds" includes anything else which, by virtue of subsection (5) above, a society is not precluded from


doing by subsection (1) above; and "relevant", in relation to a transaction of a description falling within paragraph (a), (b) or (c) of subsection (1) above, means an outstanding or, in the case of a lease or hiring, current transaction of that description (whether entered into by, or by arrangement with, the society) not being one authorised by any other authorising provision.'. —[Mr. Ian Stewart.]

Clause 61

DIRECTORS, ETC, NOT TO ACCEPT COMMISSIONS IN CONNECTION WITH LOANS

Amendments made: No. 400, in page 93, line 19 after `and', insert `subject to subsection (3A) below'.

No. 401, in page 93, line 29 at end insert—
'(3A) No offence under paragraph (a) of subsection (3) above is committed by the person who paid the commission unless he did so knowing the circumstances that constituted the offence under that paragraph on the part of the person who accepted it from him'.—[Mr. Ian Stewart.]

Clause 62

RECORDS OF LOANS, ETC. FOR DIRECTORS FALLING WITHIN S.59

Amendments made: No 194, in page 95, line 13 leave out `as respects' and insert 'all'.—[Mr. Ian Stewart.]

Clause 63

DISCLOSURE AND RECORD OF INCOME OF RELATED BUSINESSES

Amendments made: No 195, in page 95, line 37 leave out from `both' to end of line 17 on page 96 and insert
'is a director or other officer of a building society and is, or is a director of or partner in, a business associate of the society, this section shall apply, as respects that year, to that person in relation to the business of the business associate.
(2) A person is a "business associate" of a building society in any financial year of the society if that person—

(a) carries on a business which consists of or includes the provision of relevant services,
(b) provides relevant services during that year to, or to other persons in connection with advances secured on land made by, the society, and
(c) is neither a subsidiary of nor a body associated with the society (within the meaning of section 16);'.

No. 197, in page 96, line 26, leave out from first 'a' to `provides' in line 27 and insert
`business associate of a building society'.

No. 198, in page 96, line 29, leave out `associated body or firm' and insert `business associate'.

No. 199, in page 96, line 39, leave out subsection (7) and insert—
`(7) Where this section applies, as respects a financial year of a building society, to a person as a director or other officer of the society in relation to the business of a business associate, that person shall furnish the society with the requisite particulars of that business.'.

No. 200, in page 97, line 1, leave out from second `of' to `are' in line 2 and insert
`a business associate of a building society'.

No. 420, in page 97, line 2, leave out from `are' to end of line 6 and insert—

(a) except where an election under paragraph (b) below is in force, those specified in Part I of Schedule 10 to this Act;

(b) if a building society elects to adopt Part II of that Schedule for its directors as respects a financial year, those specified in Part II of that Schedule; and
(c) as regards relevant services designated by an order under subsection (6) above, such particulars as are specified in the order;

and Part III of the Schedule has effect to supplement Parts I and II and includes a definition of "the volume of the business" for the purposes of this section.'.

No. 421, in page 97, line 7, after '(9)', insert
'An election by a building society to adopt Part II of Schedule 10 as regards the requisite particulars to be furnished by its directors must be made in writing to the Commission before the beginning of the financial year as respects which it is made and'.

No. 201, in page 97, line 10, leave out subsection (10) and insert—
'(10) For the purpose of enabling him to furnish the requisite particulars of the business of a business associate of a building society the person who is under the obligation to furnish them to the society may require any person who is a member of or partner in, or holds any office or employment with, the business associate to furnish him with such information relating to its business as he may reasonably require for that purpose.'.

No. 202, in page 97, line 28, leave out `body or firm associated with' and insert `business associate of'.

No. 204, in page 98, line 17, leave out from first `services"' to end of line 18 and insert
', in relation to—

(a) land in England and Wales or Northern Ireland, has the same meaning as it has in paragraph 1(3) of Schedule 17 to this Act with the modification, in relation to land in Northern Ireland, that "disposition" does not include any disposition in the case of such a lease as is excepted, by section 4 of the Landlord and Tenant Law Amendment Act (Ireland) 1860, from the requirements of that section, and
(b) heritable property in Scotland, includes drafting all writs relating to such property and negotiating and concluding missives for its purchase, sale, transfer, lease and sublease;'.

No. 205, in page 98, line 21, at end add
`that is to say, a person who holds a licence under Part II of the Administration of Justice Act 1985'.—[Mr. Ian Stewart.]

Clause 65

ACCOUNTING RECORDS AND SYSTEMS OF BUSINESS CONTROL, ETC.

Amendment made: No. 206, in page 101, line 26, after `place', insert `or places'.—[Mr. Ian Stewart.]

Clause 70

SUMMARY FINANCIAL STATEMENT FOR MEMBERS AND INVESTORS

Amendment made: No. 207, in page 106, line 31, leave out 'investors' and insert `depositors'. — [Mr. Ian Stewart.]

Clause 73

AUDITORS' DUTIES AND POWERS

Amendments made: No. 208, in page 110, line 11, at end insert—
'(1A) If the auditors are of the opinion that the annual accounts are not in agreement with the accounting records they shall state that fact in their report.'.

No. 209, in page 110, line 14, after `records', insert `of the society'.

No. 402, in page 111, line 20, leave out 'misleading, false or deceptive' and insert `false or misleading'. — [Mr. Ian Stewart.]

Clause 76

AUDITORS' DUTIES TO COMMISSION AND RELATED RIGHTS

Amendment made: No. 210, in page 114, line 37, leave out 'send' and insert ' furnish'—[Mr. Ian Stewart.]

Clause 77

MODES OF DISSOLUTION AND WINDING UP

Amendment made: No. 211, in page 115, line 8, at end insert
except where it is dissolved by virtue of section 82(5). 83(10) or (Transfer of business to commercial company) (8).'.—[Mr. Ian Stewart.]

Clause 78

DISSOLUTION BY CONSENT

Amendments made: No. 212, in page 116, line 28, at end insert 'or to a company'.

No. 213, in page 116, line 31, after first 'in' insert 'a company or'.

No. 214, in page 116, line 36, leave out 'in accordance with' and insert 'under'.—[Mr. Ian Stewart.]

Clause 79

VOLUNTARY WINDING UP

Amendment made: No. 215, in page 116, line 43, leave out 'forwarded' and insert 'sent by the society'.—[Mr. Ian Stewart.]

Clause 80

WINDING UP BY COURT: GROUNDS AND PETITIONERS

Amendment made: No. 216, in page 117, line 33, leave out 'and by' and insert 'or'.—[Mr. Ian Stewart.]

Clause 81

SUPPLEMENTARY PROVISIONS: APPLICATION OF COMPANY INSOLVENCY LAW

Amendments made: No. 217, in page 118, line 34, leave out 'give notice' and insert 'send a copy'.

No. 218, in page 118, line 35, leave out 'notice' and insert 'copy'.

No. 219, in page 119, line 20, leave out 'those sections' and insert `that section'.

No. 220, in page 119, line 21, leave out subsection (5). —[Mr. Ian Stewart.]

Clause 82

AMALGAMATIONS

Amendments made: No. 221, in page 120, line 30, after second 'its', insert 'purpose and'.

No. 222, in page 120, line 33, leave out 'and'.

No. 223, in page 120, line 36, leave out lines 36 and 37 and insert—

'(c) retain and register one copy of the memorandum and of the rules,
(d) return another copy to the secretary of the successor, together with a certificate of registration, and

(e) keep another copy, together with a copy of the certificate of incorporation and of the certificate of registration of the memorandum and the rules, in the public file of the successor society.'.— [Mr. Ian Stewart.]

Clause 83

TRANSFER OF ENGAGEMENTS

Amendments made: No. 224, in page 122, line 7, leave out 'the' and insert
'a copy of the instrument of'.

No. 225, in page 122, line 15, at end add—
'(9) The central office shall keep a copy of the instrument and of the registration certificate issued under subsection (8) above in the public file of the building society taking the transfer.'.

No. 226, in page 122, line 15, at end insert—
'(10) Where all its engagements have been transferred, the society shall, by virtue of this subsection, be dissolved on the date specified in the registration certificate; but the transfer effected by subsection (8) above shall be deemed to have been effected immediately before the dissolution.'. — [Mr. Ian Stewart.]

Clause 84

MERGERS: PROVISIONS SUPPLEMENTING SS. 82 AND 83

Mr. Ian Stewart: I beg to move amendment No. 227, in page 112, line 22, leave out lines 22 to 26 and insert
`imposing requirements for notification by a building society, to its members and to the central office, of the receipt by the society of proposals for a transfer of engagements or an amalgamation'.

Mr. Deputy Speaker: 'Kith this it will be convenient to take Government amendments Nos. 345 to 354.

Mr. Stewart: These amendments deal with the much debated subject of what has been described as obstructive mergers. This is where a merger approach is made to a society but is not put to the members of the society that receives the approach. During the debates on the Bill in the House and in Committee and outside, a great deal of anxiety has been expressed about the proposed provisions. In response to those anxieties, I have decided that the whole process should be greatly simplified in a way that removes all the anxieties that have been expressed by hon. Members and the BSA.
In future, if these proposals are accepted, there will be only the need for notification. There will be no special voting procedures and it will be open to members to use the general provisions of the constitution of the building society once the basic information is available to them. The paper circulated by the BSA says:
The government has now greatly modified and simplified its proposals which are now acceptable to the Association.
I hope that they will also be acceptable to the House.

Dr. McDonald: I have received a letter from a small building society which continues to express anxieties. I know that the Economic Secretary has made plain the purpose of the amendments, but he may wish to add one or two points. The letter recognises that the Economic Secretary has considerably watered down the original provisions on proposals for mergers direct to members. The building society that wrote to me still feels that the revised provisions could prove embarrassing for small societies in particular and could be open to abuse. It says:
For example there would be nothing to stop a predator society making a merger approach to a significant number of


small societies, all of whom would be bound to report in the Notice of Annual General Meeting a statement of any merger approach received"—
unless that has specifically been requested to be kept confidential. The building society still feels that it would be preferable if the contested merger provisions could be removed from the Bill. It feels that unless this is done, the provisions will continue to place unreasonable pressure on small societies. As the Minister knows, these societies often provide for specialised or local needs.
The letter is couched in fairly general terms, but it would be useful if the Economic Secretary could respond. If any points need further reassurance, perhaps he would make them plain.

Mr. John Townend: I declare an interest as a director of a small building society.
My remarks are directed to amendment No. 3520. As the hon. Member for Thurrock (Dr. McDonald) has said, schedule 13, as originally drafted, could have sounded the death knell of the small local building societies, which would have been at the mercy of the large predator societies. This point was put forcibly by hon. Members on both sides in Committee. We were pleased by the way in which my hon. Friend the Economic Secretary took our point and undertook to bring back proposals on Report. He said:
I think that the consequences will be the opposite. But I am certainly willing to build in a further provision … which would restrict the obstructive mergers procedures only to cases that were not disproportionate in size. That would rule out the aggressive approaches by large societies to smaller ones."—[Official Report, Standing Committee A,18 February 1986; c. 399.]
That was helpful. I am delighted that the new proposals go further and that all that the societies are now required to do is to make a statement that they have received an approach and give the name of the building society.
As the hon. Member for Thurrock said, one or two small societies are still worried, because they feel that some large societies will make an approach to 10 or 15 small societies not just once but every year so that every year, at every annual general meeting, notices will go out with the merger statement saying that the Halifax building society or the Abbey National has made an approach. Some of the small societies feel that this might lead to a war of attrition. I have some sympathy for that point of view, but I feel that they are exaggerating. My hon. Friend the Economic Secretary to the Treasury has moved far towards the point of view that we put in Committee. The new provisions will allow small local building societies that offer important services in many of the regions to survive, provided that they are efficient. Therefore, I thank my——

It being Ten o'clock, the debate stood adjourned.

BUSINESS OF THE HOUSE

Ordered,
That, at this day's sitting, the Building Societies Bill may be proceeded with, though opposed, until any hour. — [Mr. Donald Thompson.]

Building Societies Bill

Question again proposed, That the amendment be made.

Mr. Townend: Therefore, I am very grateful to my hon. Friend for dealing with those points.

Mr. William Cash: My hon. Friend the Member for Bridlington (Mr. Townend) referred to the Abbey National building society. I want to raise with my hon. Friend the Economic Secretary to the Treasury a point on the 20 per cent. conversion issue. As it has been maintained that this will be a realistic option for building societies, will my hon. Friend say what evidence might be required before it would seem reasonable to learn about that requirement of 20 per cent., short of a building society risking loss of confidence by attempting the leap and then failing?

Mr. Ian Stewart: If my hon. Friend will consult the Official Report of today's proceedings he will find that I touched on that matter earlier when I was asked a similar question.
As for the substance of this group of amendments, I am happy to respond to the hon. Member for Thurrock (Dr. McDonald). I do not believe that the anxieties of the society whose letter she quoted will be borne out in practice. She said that it was concerned that these provisions might place unreasonable pressure on small societies. I do not think that that will be the case. Small societies are protected by the disproportionate merger procedures, so they would be less vulnerable to approaches of the kind that that society mentioned. If those two provisions are taken together, building societies will not be exposed in that damaging way.
I am grateful to my hon. Friend the Member for Bridlington (Mr. Townend) for what he had to say. I do not believe that the previous provisions would have sounded anything so dramatic as the death knell of smaller societies, but I came to the conclusion, after further consideration of this matter, that the proposed remedy was out of scale to the problem. Clearly there was a problem, but I was not convinced that it was necessary to erect such an elaborate procedure to deal with it. The notification process that I have now put forward is a practical and sensible option in the circumstances. I think that the hon. Member for Thurrock can be assured that, coupled with the disproportionate merger provisions, it should not have an adverse effect on the society that she mentioned.

Amendment agreed to.

Clause 85

MERGERS: COMPENSATION FOR LOSS OF OFFICE AND BONUSES TO MEMBERS

Amendment made: No. 228, in page 125, line 9, leave out 'chief executive' and insert 'other officer'.—[Mr. Ian Stewart.]

Clause 86

TRANSFER OF BUSINESS TO COMMERCIAL COMPANY

Amendment made: No. 229, in page 126, line 21, leave out Clause 86.—[Mr. Ian Stewart.]

Clause 87

CANCELLATION OF REGISTRATION

Amendment made: No. 230, in page 127, line 23, leave out Clause 87.—[Mr. Ian Stewart.]

Clause 89

RESTRICTION OF USE OF CERTAIN NAMES AND DESCRIPTIONS

Amendments made: No. 231, in page 129, line 5, leave out '(7)' and insert '(7B)'.

No. 232, in page 130, line 44, at end insert—
'(7A) Subsection (1) above does not prohibit a person from using a description (other than his name) which, or from holding himself out in a way that, indicates a connection between himself or his business and one or more building societies if and to the extent he has been authorised to do so in writing by the society or societies in question.
(7B) Subsection (1) above does not prohibit a person from using a description (other than his name) which, or from holding himself out in a way that, indicates a connection between himself or his business and building societies generally where the connection indicated is not misleading.'.

No. 233, in page 131, line 10, leave out 'for Northern Ireland'.—[Mr. Ian Stewart.]

Clause 90

POWER TO REQUIRE BUILDING SOCIETY TO CHANGE MISLEADING NAME

Amendment made: No. 234, in page 131, line 37. after `may', insert
', by notice served on the society,'.—[Mr. Ian Stewart.]

Clause 93

OFFENCES: LIABILITY OF OFFICERS AND DEFENCE OF DUE DILIGENCE

Amendments made: No. 235, in page 133, line 22, after `9(10)' insert
`section (Costs, procedure and evidence) (5)'.

No. 236, in page 133, line 32, leave out 'an' and insert `that'.—[Mr. Ian Stewart.]

Clause 98

INTERPRETATION

Amendments made: No. 237, in page 135, line 36, at end insert
`and references to class 1 or class 2 advances are to be construed in accordance with sections 11 and 12;'.

No. 238, in page 136, leave out lines 20 to 24.

No. 239, in page 136, line 44, at end insert—
`deposit" includes loan, and cognate expressions shall be construed accordingly;'.

No. 240, in page 137, line 26, at end insert—
'"mobile home loan" means a loan under section (Loans for mobile homes);'.

No. 241, in page 137, line 32, at end insert
`and "notice to" a person means notice given to that person, and "notify" shall be construed accordingly;'.

No. 242, in page 137, line 39, at end insert—
`officially notified", in relation to the appointment or address of a director or the chief executive of a building society, means respectively notifed to, and the last address notified to, the central office under section 55(13) or 53(5), as the case may be;'.

No. 243, in page 137, line 47, leave out 'section 14(10)(a)' and insert
`section (Qualifying asset holding for certain powers)'.

No. 244, in page 138, line 2, leave out '32(4)' and insert '13'.

No. 245, in page 138, line 10, at end insert—
'"special resolution" has the meaning given by paragraph 26 of Schedule 2 to this act;'.

No. 246, in page 138, leave out line 16 and insert
`means the aggregate of its class 1 assets, its class 2 assets and its class 3 assets;'.

No. 247, in page 138, line 21, at end insert—
'(2A) The value in sterling, of any transaction effected by or with a building society in another currency shall be determined for any purpose of this Act in accordance with directions given by the Commission under this subsection.'. — [Mt. Ian Stewart.]

Clause 99

AMENDMENTS, REPEALS AND TRANSITIONAL AND SAVING PROVISIONS

Amendments made: No. 248, in page 138, line 30, after `repealed', insert 'or revoked'.

No. 249, in page 138, in line 32, after 'repealed', insert `or revoked'.

No. 250, in page 138, line 34, after 'repeal', insert 'or revocation'.—[Mr. Ian Stewart.]

Clause 102

PROVISION OF CONVEYANCING SERVICES BY BUILDING SOCIETIES AND OTHER RECOGNISED INSTITUTIONS

Amendment made: No. 409, in page 139, line 10, leave out 'and other institutions' and insert other institutions and individuals'.

Amendments made: No. 251, New Schedule—

`SCHEMES FOR INVESTIGATION OF COMPLAINTS

PART I MATTERS TO BE PROVIDED FOR IN SCHEMES

The matters for which provision is, subject to Parts II and III of this Schedule, to be made are the following:

Administration

1. The establishment and functioning of an independent body (whether corporate or unincorporate) which is to administer the scheme.
2. The identity of the members.
3. The manner in which the expenses of the scheme are to be met by the members.

The adjudicator

4. The appointment of an independent adjudicator to conduct investigations under the scheme and his tenure of office and remuneration.

Scope of scheme

5. The matters action in relation to which is to be subject to investigation under the scheme and the grounds for making it subject to investigation.

Functions of adjudicator

6. The duty of the adjudicator to investigate, and make determinations on, actions duly referred for investigation.

7. The powers of, and procedure to be followed in the conduct of investigations by, the adjudicator.

8. The powers of the adjudicator on the making of determinations.

Determinations and their effects

9. The extent to which determinations are binding.

10. The manner in which determinations are to be communicated and published.

Reports by investigators to administering body

11. The making to the body administering the scheme of regular reports by the adjudicator as to the discharge of his functions, and their publication.

Amendment or revocation of scheme

12. The manner of amending or revoking the scheme.

Accession to membership

13. Accession to membership of other societies.

Withdrawal from membership

14. Withdrawal from membership.

PART II REQUIREMENTS FOR RECOGNISED SCHEMES: MATTERS OF COMPLAINT

Share accounts

1. The operation or termination of a share account and the grant or refusal to grant a shareholder other facilities normally available to shareholders of his description.

Note: The operation or termination of a share account includes any aspect of the relationship or termination of the relationship between the society and a shareholder as such and in particular the operation or termination of any services incidental to such accounts.

Note: The grant of facilities includes the terms on which they are granted.

Deposit accounts

2. The operation or termination of a deposit account and the grant or refusal to grant a depositor other facilities normally available to depositors of his description.

Note: The operation or termination of a deposit account includes any aspect of the relationship or the termination of the relationship between the society and a depositor as such, including in particular the operation or termination of any services incidental to such accounts.

Note: The grant of facilities includes the terms on which they are granted.

Borrowing members: class 1 or class 2 advances

3. The operation or termination of the account of a member borrowing on a class 1 or class 2 advance and the grant or refusal to grant a borrowing member of that description other or further class 1, or as the case may be, class 2 advances secured on the same or different land or other facilities normally available to borrowing members of his description.

Note: The operation or termination of the account of a borrowing member includes any aspect of the relationship or the termination of the relationship between the society and a borrowing member as such, including in particular the exercise of the right of foreclosure or any other power over the land by virtue of the mortgage.

Note: The grant of advances includes the terms on which they are granted.

Borrowers: mobile home loans

4. The operation or termination of the account of a borrower under section (Loans for mobile homes) and the grant or refusal to grant to a borrower under that section other facilities normally available to borrowers of his description.

Note: The operation or termination of the account of a borrower under section (Loans for mobile homes) includes any aspect of the relationship or the termination of the relationship between the lender and such a borrower, including in particular the exercise of any power over the security.

Note: The grant of facilities includes the terms on which they are granted.

Borrowers: other loans

5. The operation or termination of the account of a borrower under section 14 and the grant or refusal to grant a borrower under that section other facilities normally available to borrowers of his description.

Note: The operation or termination of the account of a borrower under section 14 includes any aspect of the relationship or the termination of the relationship between the lender and such a borrower including in particular, in the case of a secured loan, the exercise of any power over the security.

Note: The grant of facilities includes the terms on which they are granted.

Money transmission services

6. The terms on which they are provided, the operation of or the withdrawal of money transmission services.

Note: "Money transmission services" means the services of that description provided in accordance with Schedule 8 to this Act.

Foreign exchange facilities

7. The terms on which are provided, the operation of or the withdrawal of foreign exchange services.

Note: "Foreign exchange services" means services of that description provided in accordance with Schedule 8 to this Act.

Agency payments and receipts

8. The terms on which payments are made or received as agents or the operation or withdrawal of the service.

Note: The payments made or received as agents are those made or received in accordance with Schedule 8 to this Act.

Provision of credit

9. The operation or termination of the account of a borrower with the person providing the credit.

Note: The credit provided is credit provided under arrangements for the provision of credit in accordance with Schedule 8 to this Act.'.

PART III MINIMUM REQUIREMENT FOR RECOGNISED SCHEMES: OTHER PROVISIONS

Grounds of complaint

1. The grounds for making action by a building society or associated body subject to investigation under the scheme must be that the action constitutes—

(a) in the case of a building society, a breach of the society's obligations under this Act, the rules or any other contract, or
(b) in the case of an associated body, a breach of the associated body's obligations under its rules (if any) or any contract, or
(c) unfair treatment, or
(d) maladministration,

in relation to the complainant and has caused him pecuniary loss or expense or inconvenience.

Permissible exclusions from investigation

2. A scheme must not exclude action from investigation on any other than the following grounds, that is to say—

(a) that the complaint is frivolous or vexatious;
(b) that the action is the subject of proceedings in a court of law or was the subject of such proceedings in which a judgment on the merits was given;
(c) that, where the society or associated body has a procedure for the resolution of complaints by it (an "internal procedure"), the procedure has not been invoked or has not been exhausted;
(d) that there has been undue delay in having the matter investigated under the scheme; or
(e) that the action in question occurred outside the United Kingdom.

Note: An internal procedure for resolution of complaints is not to be treated as having been invoked unless the complainant has made his complaint to the principal office of the society or, as the case may be, the registered office of the associated body and is not to be treated as having been exhausted unless more than three months has elapsed since the complainant invoked it without any decision on his complaint having been communicated to him.

Note: Delay in having a matter investigated under the scheme is not "undue delay" unless at least six months (disregarding the period for exhausting the society's or associated body's internal procedure) has expired since the matter came to the knowledge of the complainant; and a person is not, for this


purpose, to be presumed to have knowledge of the contents of a document which contains or relates to the terms or proposed terms of any transaction between him and the society.

Functions of adjudicator

3. A scheme must, as regards the duties and powers attached to the investigation of complaints under the scheme—

(a) impose on the adjudicator a duty, subject to any provision made in pursuance of sub-paragraph (c) below, to investigate and determine any complaint duly made;
(b) impose on the adjudicator a duty to afford the complainant and the society or associated body an opportunity to make representations (whether orally or in writing) in relation to the action complained of;
(c) confer power on the adjudicator to advise, mediate or act as conciliator before proceeding further with an investigation;
(d) confer power on the adjudicator to extend the scope of his investigation to other matters related to the action complained of; and
(e) confer on an adjudicator such powers to require information and documents relevant to the matter to be furnished to him as are necessary for the purposes of the investigation.

4.–(1) Subject to any provision made in pursuance of sub-paragraph (3) below, a scheme must authorise the adjudicator, in reaching his decision, to have regard to, but not to be bound by, any matter (whether or not of obligation) relevant to the action complained of and to question any decision.

(2) A scheme must impose on the adjudicator a duty, in reaching his decision, to have regard to—

(a) the rules (if any) of the society or associated body;
(b) the provisions of any deed or contract binding the society and the complainant or, as the case may be, the associated body and the complainant;
(c) the provisions of any code of conduct applicable to the conduct by the society or associated body of its affairs or business;
(d) any advertisement issued by the society or associated body in connection with any aspect of its activities and any communication with the complainant.

(3) Subject to sub-paragraph (4) below, a scheme may preclude the adjudicator, in his determination, from questioning the merits of any decision taken by the society or associated body with reference to—

(a) the taking or conduct of legal proceedings to enforce any right of the society or associated body; or
(b) the creditworthiness, for the purposes of any advance or other service or facility, of the complainant;

but not otherwise.

(4) Where investigation of a complaint on the ground of maladministration involves consideration by the adjudicator of any decision taken with reference to the creditworthiness of the complainant the scheme must confer power on the adjudicator to direct the society or associated body to take its decision again and reach it by proper procedures.

5.–(1) Subject to sub-paragraph (2) below, a scheme must confer power on the adjudicator, by his determination, to do either or both of the following, that is to say—

(a) direct the society or associated body whose action is complained of to take such steps as are specified in the determination;
(b) order the society or associated body whose action is complained of to pay the complainant a sum by way of compensation for the loss, expense or inconvenience caused by the action.

(2) A scheme may impose a limit on the amount of compensation that a society or associated body may be ordered to pay a complainant, but the limit must not be less than £100,000.

Effect of determinations and their communication

6.–(1) Subject to any provision made in pursuance of sub-paragraph (2) or (3) below, a scheme must provide that, if the complainant, by notice to the adjudicator within the period specified in the scheme, accepts his determination the society or associated body is under an obligation to take the steps it is directed to take or pay the compensation awarded or both.

(2) A scheme may relieve a society of the obligations imposed by a determination if, but only if, the society undertakes an

obligation to give notice to its members of the reasons for its non-fulfilment of the obligations imposed by the determination in the next directors' report under section 69 and to give notice of those reasons to the public in such manner as the adjudicator requires.

(3) A scheme may relieve an associated body of the obligations imposed by a determination if, but only if, each of the building societies with which it is associated undertakes an obligation to give notice to its members of the reasons for the non-fulfilment of the obligations imposed by the determination in the next directors' report under section 69 and to give notice of those reasons to the public in such a manner as the adjudicator requires.

7. A scheme must impose on the adjudicator an obligation not to disclose, whether in his determination or otherwise, any information or opinion furnished in confidence to the society or, as the case may be, to the associated body for the purpose of any action on its part.

Reports by adjudicator to administering body

8. A scheme must require reports by the adjudicator as to the discharge of his functions to be made to the body administering the scheme not less frequently than once in every year.

Publication

9.–(1) A scheme must permit the body administering the scheme to publish the whole or any parts of the reports made to them by the adjudicator.

(2) A scheme, if it makes the provision authorised by paragraph 6(2) or (3) above, must require the body administering the scheme to send to the Commission, not less frequently than once in every year, particulars of the cases in which building societies have undertaken the alternative obligation authorised by either or both of those sub-paragraphs.'—[Mr. Ian Stewart.]

Amendment made: No. 252, New Schedule—

`SCHEMES FOR INVESTIGATION OF COMPLAINTS: RECOGNITION, ACCESSION, ETC.

Preliminary

1. For the purposes of this Schedule, a scheme—
qualifies for recognition" if it makes provision for the matters specified in Part I of Schedule (Schemes for investigation of complaints) and the matters action in relation to which is subject to investigation under the scheme consist of or include one or more of the prescribed matters of complaint; and
conforms to the relevant requirements" if, in relation to a prescribed matter of complaint it makes action in relation to that matter subject to investigation in accordance with Part III of that Schedule;

and any reference to a scheme qualifying for recognition, or being recognised, to any "extent" indicates recognition of it for the purpose of investigations of action in relation to one or more prescribed matters of complaint.

(2) – (1) The function of the Commission of granting recognition of schemes is exercisable, in accordance with paragraph 4 or 5 below, on the Commission's own motion or on a submission for its approval made by or on behalf of any building societies.

(2) In this Part of this Schedule, in relation to a scheme recognised by the Commission to any extent, a "direction for its recognition" means a direction that the scheme is, to the extent specified in the direction, a scheme recognised by the Commission.

The register of recognised schemes

3. – (1) The central office shall maintain a register of recognised schemes for the investigation of complaints ("the register"), and the register shall—

(a) contain a copy of every scheme and the direction for its recognition a copy of which is directed to be kept in it by any provision of this Part of this Schedule and
(b) be available for inspection on reasonable notice by members of the public on payment of the prescribed fee.

(2) Any member of the public shall be entitled, on payment of the prescribed fee, to be furnished with a copy of any scheme and the direction for its recognition kept in the register.

Procedure for recognition: Commission's initiative

4. – (1) If it appears to the Commission, from its own enquiries or from information made available to it, that a scheme has been made or is in operation which qualifies for recognition the Commission shall consider the scheme and the extent to which it qualifies for recognition.

(2) If, on consideration of a scheme, the Commission is satisfied that the scheme qualifies for recognition and conforms to the relevant requirements in relation to one or more prescribed matters of complaint, the Commission shall approve the scheme as a recognised scheme to such extent as it considers appropriate.

(3) The Commission shall, on approving a scheme under this paragraph, give a direction for its recognition.

(4) On giving a direction for the recognition of a scheme, the Commission shall send a copy of the scheme and of the direction to the central office; and the central office shall keep the copy of the scheme and of the direction in the register.

Procedure for recognition: submission by societies

5. –(1) Submission by or on behalf of building societies of a scheme for approval by the Commission as a recognised scheme shall be made by an application for recognition which shall be—

(a) made in such manner as the Commission specifies, either generally or in any particular case; and
(b) accompanied by such information as the Commission may reasonably require, either generally or in any particular case, in order to make its decision on the application;

and in this paragraph "the applicants" means those societies or the person acting on their behalf for the purposes of the application.

(2) Where an application is made to the Commission for recognition of a scheme then—

(a) if it appears to the Commission that the scheme qualifies for recognition and conforms to the relevant requirements in respect of one or more of the prescribed matters of complaint, the Commission shall approve the scheme as a recognised scheme to such extent as it considers appropriate;
(b) if it appears to the Commission that the scheme, with modifications, will, in addition to qualifying for recognition, conform to the relevant requirements in respect of one or more of the prescribed matters of complaint, and the applicants agree on appropriate modifications within the period of 21 days from the date on which the Commission notifies the applicants of the modifications it proposes for their agreement, the Commission shall approve the scheme as modified as a recognised scheme to such extent as it considers appropriate;

but otherwise it shall withhold its approval.

(3) The Commission shall, on approving a scheme, give a direction for its recognition and send copies of the direction to the applicants.

(4) On giving a direction for the recognition of a scheme, the Commission shall also send a copy of the scheme and of the direction to the central office; and the central office shall keep the copy of the scheme and of the direction in the register.

Procedure on accession to schemes

6. –(1) A building society which accedes to a recognised scheme or has acceded to a scheme which becomes a recognised scheme shall, within the period of 21 days beginning with the date of its accession or on which it received a copy of the direction for its recognition, as the case may be, send a notice of that fact to the central office and to the Commission.

(2) A notice by a society under paragraph (1) above shall specify the prescribed matters of complaint action in relation to which by the society is subject to investigation under the scheme.

(3) The central office, on receiving such a notice from a society, shall, if satisfied that the scheme is a recognised scheme to the extent required to enable the society to comply with its duty under section (schemes for the investigation of complaints) (3) in relation to the prescribed matters of complaint specified in the notice, record the accession of the society to the scheme in the public file of the society.

(4) If a building society fails to comply with sub-paragraph (1) above, the society shall be liable on summary conviction—

(a) to a fine not exceeding level 4 on the standard scale; and
(b) in the case of a continuing offence, to an additional fine not exceeding £100 for every day during which the offence continues;

and so shall any director of the society who is also guilty of the offence.

Withdrawal of recognition

7. –(1) The Commission may withdraw its recognition of a scheme if it appears to the Commission that—

(a) the scheme does not conform to the relevant requirements; or
(b) the scheme is so operated as not to conform to those requirements.

(2) Withdrawal of recognition of a scheme under this paragraph may operate in relation to the scheme as a whole or to the extent to which the scheme makes one or more prescribed matters of complaint subject to investigation under it.

8. – (1) If the Commission proposes at any time to withdraw recognition of a scheme to any extent, it shall serve on each member, on the body administering the scheme and on the adjudicator under the scheme, a notice stating—

(a) that the Commission proposes to withdraw recognition and to what extent;
(b) the grounds for the proposed withdrawal of recognition; and
(c) that the person receiving the notice may make representations with respect to the proposed withdrawal within such period of not less than 14 days as may be specified in the notice.

(2) The Commission shall, before reaching a decision on whether to withdraw recognition, consider any representations made to it in accordance with sub-paragraph (1) above and shall serve on every person on whom it served a notice under that sub-paragraph a notice stating its decision and the grounds for it.

9. Withdrawal of recognition by the Commission shall take effect as from such date as is specified in the notice of its decision, being a date not less than one year nor more than two years after the date of the notice.

Withdrawal from membership

10. – (1) A building society wishing to withdraw from membership of a recognised scheme shall send notices of its proposed withdrawal to the central office and to the Commission.

(2) A notice by a society under subparagraph (1) above shall specify the prescribed matters of complaint action in relation to which by the society is subject to investigation, or on its withdrawal, will become a member under, which, as regards each of the prescribed matters of complaint specified in the notice, action by the society is or will be subject to investigation.

(3) The central office, on receiving such a notice from a society, if satisfied that its withdrawal from the scheme will not result in a failure by it to comply with the duty imposed on it by section (schemes for the investigation of complaints) (3), shall confirm the withdrawal of the society from the scheme; but, if the central office is not so satisfied, the central office shall withhold its confirmation.

(4) If the central office withholds its confirmation of a society's withdrawal from a scheme, the society shall continue to be a member of the scheme and bound and entitled under the scheme accordingly.

(5) On confirming the withdrawal of a society from a scheme the central office shall send to the society and to the Commission notice of its decision and the central office shall record the decision in the public file of the society.'. — [Mr. Ian Stewart.]

Amendment made: No. 253, New Schedule—

'SETTLEMENT OF DISPUTES

Part I

PROCEEDINGS IN COURT

Jurisdiction of the court

1. –(1) No court other than the High Court or, in the case of a building society whose principal office is in Scotland the Court of Session, shall have jurisdiction to hear and determine disputes to which the paragraph applies; and, in this Part of the Schedule, "the court" means the High Court or, as the case may be, the Court of Session.

(2) This paragraph applies to any dispute—

(a) between a building society and a member of the society in his capacity as a member, or
(b) between a building society and a representative of such a member in that capacity.

in respect of any rights or obligations arising from the rules of the society or any provision of this Act or any statutory instrument under it.

(3) Except in the cases referred to in sub-paragraph (5) below, no disputes to which this paragraph applies may be referred to arbitration.

(4) The court shall not hear and determine any dispute arising out of section 55(8)(a) or paragraph 28(4)(a) of Schedule 2 to this Act.

(5) The court shall not hear and determine any dispute which is required to be referred to arbitration under paragraph 4 below or which is referred to the Commission under paragraph 6 or to an adjudicator under paragraph 7 below except as provided in paragraph 2 below.

2. The court may hear and determine a dispute falling within paragraph 1(5) above in any case where, on the application of any person concerned, it appears to the court—

(a) that application has been made by either party to the dispute to the other party for the purpose of having the dispute settled by arbitration, and
(b) that either arbitrators have not been appointed within 40 days of that application or the arbitrators have refused, or have neglected for a period of 21 days, to proceed with the reference or make an award.

Right of central office to be heard

3. –(1) Any person who institutes proceedings in the court in relation to a dispute to which paragraph I above applies shall give notice of the fact and of the matter in dispute to the central office.

(2) The court shall not proceed to hear a dispute to which paragraph 1 applies until the court is satisfied that the notice required by sub-paragraph (1) above has been given.

(3) The central office shall be entitled, with the leave of the court, to attend and to be heard at any hearing of a dispute to which paragraph 1 applies.

PART II ARBITRATION

Circulation of election addresses, resolutions and statements

4. –(1) If the rules of the society so provide, any dispute in respect of a refusal by a building society to send to its members—

(a) copies of an election address, in accordance with section 55(7), or
(b) any document required to be sent under paragraph 28(1) of Schedule 2 to this Act,

shall, unless the refusal is on one of the grounds specified in sub-paragraph (2) below be referred to arbitration.

(2) Those grounds are—

(a) that publicity for the document in question would be likely to diminish substantially the confidence in the society of investing members of the public, or
(b) that the rights conferred by section 55(7) or paragraph 28(1) are being abused to seek needless publicity for defamatory matter.

Procedure on a reference to arbitration

5. – (1) This paragraph has effect in relation to an arbitration under paragraph 4(1) above.

(2) One or more arbitrators shall be appointed in the manner provided for by the rules of the building society; and so shall another arbitrator if an appointed arbitrator dies or refuses to act.

(3) No arbitrator acting on a reference shall be benefically interested (whether directly of indirectly) in the funds of the society.

(4) The rules of the society may provide for the procedure to be followed on a reference to arbitration.

(5) An award made by arbitrators, or the majority of them, shall be final and binding.

(6) For the purposes of the Arbitration Act 1950 and the Arbitration Act 1979 or, in Northern Ireland, the Arbitration Act (Northern Ireland) 1937 the rules of the society shall be treated as an arbitration agreement.

(7) In relation to Scotland, sub-paragraph (6) above shall be omitted.

Access to register of members

6. –(1) Any dispute as to the rights of a member of a building society under paragraph 14 of Schedule 2 to this Act shall be referred to the Commission.

(2) The reference of a dispute to the Commission under this paragraph shall be treated as a reference to arbitration; and its award shall have the same effect as that of an arbitrator acting in a reference under paragraph 4(1) above.

Disputes cognizable under a scheme

7. – (1) Any dispute relating to a prescribed matter of

complaint action in relation to which is subject to investigation under a scheme under section (Schemes for the investigation of complaints) may, if the complainant and the society or, as the case may be, the complainant and the associated body agree, instead of being determined by the adjudicator under the scheme, be referred to him as arbitrator.

(2) The reference of a dispute to an adjudicator under subparagraph (1) above shall be treated as a reference to arbitration; and his award shall have the same effect as that of an arbitrator acting in a reference under paragraph 5(1) above.

(3) Any expression used in this paragraph and section (Schemes for the investigation of complaints) has the same meaning in this paragraph as in that section.

General

8. In this Part of this Schedule, in relation to an arbitration in Scotland, references to an arbitrator shall be read as references to an arbiter.'.—[Mr. Ian Stewart.]

Amendment made: No. 254, New Schedule—

`TRANSFERS OF BUSINESS: SUPPLEMENTARY PROVISIONS

PART I ISSUE OF STATEMENT TO MEMBERS

Preliminary

1. In this Part of this Schedule—
prescribed matters" in relation to any transfer of the business of a building society to its successor, means the matters relating to the transfer, the society, its officers, members or depositors, or the successor which are prescribed in regulations made under paragraph 5 below; and
transfer statement", in relation to a transfer of business by a building society, means the statement with respect to the transfer to be sent to members of the society under paragraph 2 below.

Duty to send transfer statements to members

2. A building society which desires to transfer its business shall, in accordance with this Part of the Schedule, send a transfer statement to every member entitled to notice of a meeting of the society.

3. A transfer statement, in relation to a transfer of business by a building society, shall contain—

(a) the particulars required, in relation to the prescribed matters, by the regulations made under paragraph 5 below, and
(b) particulars of any other matters required by the Commission in the case of the particular transfer,

with or without other particulars regarding the transfer.

4. — (1) Subject to sub-paragraph (2) below, a building society shall, in relation to a transfer of business, include a transfer statement in or with the notice to be sent to its members of the meeting of the society at which the requisite transfer resolutions are to be moved.

(2) No transfer statement shall be sent unless its contents, so far as they concern the prescribed matters or any matter of which particulars are required to be given under paragraph 3(b) above, have been approved by the Commission.

5. –(1) The Commission, with the consent of the Treasury, may make regulations for the purpose of specifying, as prescribed matters, the matters of which transfer statements are to give particulars; and the regulations may also require particulars to be given of any alternatives to the particular transfer which were available to the society making the transfer.

(2) The power to make regulations under this paragraph is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

PART II CONFIRMATION BY COMMISSION: PROCEDURE

6. An application by a building society for confirmation by the Commission of a transfer of its business to a company shall be made in such manner as the Commission may prescribe.

7. –(1) Where a building society applies for confirmation of a transfer of its business, the society shall publish a notice of the application in any one or more of the London Gazette, the Edinburgh Gazette or the Belfast Gazette, as the Commission directs and, if it so directs, in one or more newspapers.

(2) A notice published in pursuance of sub-paragraph (1) above shall—

(a) state that any interested party has the right to make representations to the Commission with respect to the application;


(b) specify a date determined by the Commission before which any written representations or notice of a person's intention to make oral representations must be received by the Commission; and
(c) specify a date determined by the Commission as the day on which it intends to hear any oral representations.

8. –(1) After the date specified in the notice in pursuance of paragraph 7(2)(b) above, the Commission shall—

(a) determine the time and place at which oral representations may be made;
(b) give notice of that determination to the building society making the transfer and any persons who have given notice of their intention to make oral representations; and
(c) send copies of the written representations received by the Commission to the building society making the transfer.

(2) The Commission shall allow the building society making the transfer an opportunity to comment on the written representations, whether at a hearing or in writing, before the expiration of such period as the Commission specifies in a notice to the society.'.—[Mr. Ian Stewart.]

Schedule 1

THE BUILDING SOCIETIES COMMISSION

Amendments made: No. 255, in page 140, line 18, leave out 'in writing'.

No. 256, in line 36, at end insert—
'3A. No person who has attained the age of 70 years is eligible to be or to remain a part-time member of the Commission.'.

No. 257, in page 141, line 38, at end insert—
'11A. In Schedule 2 to the Parliamentary Commissioner Act 1967 (which lists the authorities subject to investigation under that Act) there shall be inserted in the appropriate place in alphabetical order the words "Building Societies Commission".'. —[Mr. Ian Stewart.]

Schedule 2

ESTABLISHMENT, INCORPORATION AND CONSTITUTION OF SOCIETIES

Amendments made: No. 258, in page 142, line 32, leave out from 'society' to end of line 33.

No. 259, in page 142, line 34, leave out 'the society with the' and insert 'it with a'.

No. 260, in page 142, line 35, leave out sub-paragraph (3) and insert—
'(3) On registering a building society under sub-paragraph (2) above, the central office shall—

(a) retain and register one copy of the memorandum and of the rules,
(b) return another copy to the secretary of the society, together with a certificate of registration, and
(c) keep another copy, together with a copy of the certificate of incorporation, and of the certificate of registration of the memorandum and the rules, in the public file of the society.'.

No. 261, in page 144, leave out lines 31 to 34.

No. 262, in page 145, line 39, after 'copy', insert
', together with a copy of the certificate of registration of the alteration,'.

No. 263, in page 149, line 34, leave out 'supply' and insert 'give'.

No. 264, in page 149, line 37, leave out 'supplied' and insert 'given'.

No. 265, in page 150, line 18, at end insert—
'(4) For the purposes of this Act "registered address", in relation to a member of a building society, means—


(a) the address shown in the register maintained under this paragraph, except in a case where paragraph (b) below applies;
(b) where the member has requested that communications from the society be sent to some other address, that other address.

Exception to duties to send documents

13A. – (1) A building society is not obliged by any provision of this Act or its rules to send a notice or other document to a member in whose case the society has reason to believe that communications sent to him at his registered address are unlikely to be received by him.

(2) Where the requirement relates to notice of a meeting or postal ballot of the society, the society must, instead, comply with the advertising requirements of paragraph 32 below.'.

No. 266, in page 154, line 37, leave out 'sent', and insert 'given'.

No. 267, in page 154, line 42, leave out 'sent' and insert 'given'.

No. 268, in page 155, line 34, leave out from `(b)' to `in' in line 35.

No. 269, in page 155, line 38, at end insert
', at the beginning of the period of 56 days immediately preceding the voting date for members voting in person at a meeting or, as the case may be, on a postal ballot.'.

No. 270, in page 155, line 41, leave out from beginning to end of line 46 and insert
'he holds shares in the society to a value not less than the prescribed amount or such lesser amount as may be specified in the rules.'.

No. 271, in page 157, line 35, at end insert—
. No resolution of a building society shall be passed as a borrowing members' resolution unless it is required to be so passed by or under any provision of this Act or by the rules of the society.'.

No. 272, in page 158, line 11, at end insert—

'Transfer resolutions

27A. – (1) The transfer resolutions required for the purposes of section (Transfer of business to commercial company), for the approval by members of a building society of a transfer of its business are two resolutions, of which—

(a) one is passed as a borrowing members' resolution, and
(b) the other ("the requisite shareholders' resolution") is passed in accordance with sub-paragraphs (2) to (5) below.

(2) In a case where the successor is to be a specially formed company, the requisite shareholders' resolution—

(a) must be passed as a special resolution, and
(b) must be passed on a poll on which not less than 20 per cent. of the members of the society qualified to vote on a special resolution voted;

and the notice of the resolution required by sub-paragraph (a) or sub-paragraph (b) of paragraph 26(1) above, as the case may be, must specify that the resolution will not be effective unless both of the requirements specified in this sub-paragraph are fulfilled.

(3) Subject to any direction under sub-paragraph (5) below, in a case where the successor is to be an existing company, the requisite shareholders' resolution must be passed as a special resolution and either—

(a) must be passed by not less than 50 per cent. of the members qualified to vote on a special resolution, or
(b) must be passed by the holders, being members qualified to vote on a special resolution, of shares in the society to a value, on the voting date, representing not less than 90 per cent. of the total value of the shares held on that date by the members so qualified to vote;

and, in either case, the resolution must be a resolution in relation to which the notice required by paragraph 26 above includes a statement specifying that the resolution will not be effective unless either of the above requirements is fulfilled has been duly given.

(4) If the Commission considers it expedient, in relation to a transfer of the business of a building society to an existing company, to do so for the purpose of protecting the investments of the sharholders of or depositors with the society, the Commission may give a direction under sub-paragraph (5) below.

(5) A direction under this sub-paragraph is a direction that, for the purposes of the transfer of business specified in the direction, the requisite shareholders' resolution is to be effective if it is passed as a special resolution.

(6) The Treasury, after consultation with the Commission may by order amend sub-paragraph (2)(b), (3)(a) or (3)(b) above so as to substitute for the percentage for the time being specified in the sub-paragraph such other percentage as it thinks appropriate.

(7) The power to make orders under sub-paragraph (6) above is exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(8) In this paragraph "voting date", with reference to a requisite shareholders' resolution, has the same meaning as in paragraph 22(7) above. '.

No. 273, in page 158, line 18, leave out 'and (5)' and insert '(4A) and (4B)'.

No. 274, in page 158, line 23, leave out sub-paragraph (b).

No. 275, in page 158, in line 26, leave out 'circulate' and insert 'send'.

No. 276, in page 158, line 27, after 'meeting', insert 'a copy of'.

No. 277, in page 158, line 28, leave out '200' and insert `100'.

No. 278, in page 158, line 31, after first 'number' insert—

`(i) in the case of a society with a qualifying asset holding, is fifty or such lesser number as is specified for the purpose in the rules of the society, and
(ii) in the case of any other society'.

No. 279, in page 159, line 2, leave out from 'send' to second 'a' and insert
`notices of a resolution or copies of'.

No. 280, in page 159, line 4, after 'or', insert,
', as the case may be,'.

No. 281, in page 159, line 8, at end insert
`or for frivolous or vexatious purposes.'.

No. 282, in page 159, line 12, at end insert—
`(4A) If the rules of a building society so provide, sub-paragraph (1) above does not require notice of a resolution to be given to members of the society if the resolution is in substantially the same terms as any resolution which has been defeated at a meeting or on a postal ballot during the period beginning with the third annual general meeting before the date on which notice of the resolution is given to the society.
(4B) No copies of a statement with respect to a resolution shall be sent to members of a building society if, on any of the grounds in sub-paragraph (4) or (4A) above, the society does not give the notice of the resolution to them required by sub-paragraph (1)(a) above.'.

No. 283, in page 159, line 13, leave out from beginning to end of line 26 and insert—
'(5) The Commission shall hear and determine any dispute arising under sub-paragraph (4)(a) above,'.

No. 284, in line 40, leave out from 'The' to 'statement' and insert
'notices of a resolution and the copies of a'.

No. 285, in line 41, leave out '28(1)(b)' and insert '28(1)(a)'.

No. 286, in line 44, leave out 'copies' and insert `them'.

No. 287, in line 47, leave out from 'Where', to second `of and insert
`notices of a resolution or copies'.

No. 288, in page 160, line 4, after first 'a', insert `notice or'.

No. 289, in page 160, line 6, after first 'a', insert `notice or'.

No. 290, in page 162, line 7, leave out from beginning to 'For' in line 1 on page l63 and insert—

'Advertising requirements in lieu of notice of meetings, etc.

32. — (1) The advertising requirements referred to, in relation to notices of meetings or postal ballots of building societies, are as follows.

(2) Notice of the holding of the meeting or of the postal ballot must be given either—

(a) by displaying a notice in a prominent position in every branch office, or
(b) by advertisement in one or more newspapers circulating in the areas in which the members of the society reside,

according as the rules of the society provide.

(3) The notice must be so given not later than 21 days before the date of the proposed meeting or, as the case may be, the final date for the receipt of completed ballot papers.

(4) The notice shall state where members may obtain copies of the resolutions and any statements with respect to the matter referred to in a resolution, forms relating to voting by proxy and, in the case of a postal ballot, the ballot papers.

The prescribed amount

33.—(1).'.

No. 291, in page 163, line 10, leave out Part IV. —[Mr. Ian Stewart.]

Schedule 3

AUTHORISATION: SUPPLEMENTARY PROVISIONS

Amendments made: No. 292, in page 166, line 37, leave out 'in writing'.

No. 293, in page 167, line 13, at end insert—
'(4A) If the grounds for the proposed refusal include the ground that any officer of the society is not a fit and proper person to hold office in the society the Commission shall also serve the notice specified in sub-paragraph (4) above on the officer concerned giving him the like right to make representations and to be heard with respect to his fitness and propriety for office.'.

No. 294, in line 16, after '(4)', insert 'or (4A)'.

No. 295, in line 20 after 'society', insert
`and every other person on whom a notice was served under sub-paragraph (4A) above.'.

No. 296, in line 34, leave out sub-paragraph (8).

No. 297, in page 168, line 12, leave out paragraph 4.

No. 298, in page 172, line 5, leave out paragraph 10.

No. 299, in line 11, leave, out from '11' to end of line 25 and insert—

'(1) The modifications of the provisions of Part III of this Schedule in their application to the imposition of conditions by the Commission in pursuance of a direction of an appeal tribunal under section (Determination of appeal) (6) or (7) are as follows.
(2) The notice under paragraph 5(1) shall be served on the society and the other persons there specified within the period of 14 days beginning with the date on which the Commission received notice of the tribunal's decision under subsection (8) of that section; and a copy shall also be sent within that period to the tribunal.
(3) The notice under paragraph 5(1) may specify, as the period within which representations may be made, a period of now less than 7 days.
(4) If the Commission serves a notice under paragraph 6(2) on the society and the other persons there specified it shall also send a copy of the notice to the tribunal.

No. 300, in line 27, leave out paragraph 12 and insert—
'12. Where any provision of this Schedule requires notice of any matter to be served on every director of a building society that requirement is satisfied by serving notice on each director whose appointment has been officially notified and the non-receipt of a notice of a matter by a director or the chief executive does not affect the validity of any action on the part of the Commission.'. —[Mr. Ian Stewart.]

Schedule 4

ADVANCES: SUPPLEMENTARY PROVISIONS

Amendments made: No. 301, in page 173, line 3, leave out Part I.

No. 302, in page 174, line 42, after 'society', insert 'or any other person'.

No. 303, in page 174, line 43, leave out from 'excuse' to end of line 5 on page 175 and insert 'shall be an offence'.

No. 304, in page 175, line 10, at end insert—
'and in relation of such an offence on the part of a building society, so shall any officer who is also guilty of the offence.'.

No. 305, in page 176, line 41, at end add—

'Power to prescribe form of documents

5. —(1) The Chief Registrar may make rules for prescribing anything authorised or required by any provision of this Schedule to be prescribed; and in this Schedule "prescribed" means prescribed by rules made under this paragraph.

(2) The power to make rules under this paragraph shall be exercisable by statutory instrument.'.—[Mr. Ian Stewart.]

Schedule 5

THE BUILDING SOCIETIES INVESTOR PROTECTION BOARD

Amendment made: No. 306, in page 177, line 41, leave out 'in writing'. —[Mr. Ian Stewart.]

Schedule 6

INSOLVENCY PAYMENTS: TRUSTS AND JOINT HOLDINGS

Amendments made: No. 307, in page 179, line 7, leave out 'or loan'.

No. 308, in page 179, line 7, leave out 'or to'. — [Mr. Ian Stewart.]

Schedule 7

INVESTORS: SPECIAL PROVISIONS

Amendments made: No. 309, in page 180, line 42, at end add—
'(4) The Treasury may from time to time by order direct that this paragraph shall have effect as if for the reference in sub-paragraph (1) above to £5,000 there were substituted a reference to such higher amount as may be specified in the order.
(5) An order under sub-paragraph (4) above shall apply in relation to deaths occurring after the expiraton of a period of one month beginning with the date on which the order comes into force.
(6) The power to make an order under sub-paragraph (4) above is exercisable by statutory instrument but no such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.'.

No.310, in page 181, line 1, leave out from first 'of' to first 'the' in line 2 and insert
'a deposit made by him with'. —[Mr. Ian Stewart.]

Schedule 8

POWERS TO PROVIDE SERVICES

Amendments made: No. 311, in page 181, leave out line 20 and insert—
'8. Establishment and management of unit trust schemes for the provision of pensions.
8A. Establishment and, as regards the contributions and benefits, administration, of pension schemes.'.

No. 312, in page 181, line 21, at end insert
', whether on behalf of the person effecting or the person providing the insurance.
9A. Giving advice as to insurance of any description.'.

No. 426, in page 181, line 24, at end insert—

'PART 1A

GENERAL RESTRICTION ON SERVICES ABROAD

(1) Subject to sub-paragraph (2) below, no power to provide a service of a description specified in Part I of this Schedule includes power to maintain a place of business in a country or territory outside the United Kingdom for that purpose unless the society also conducts the principal business of a building society in that country or territory.

(2) This paragraph does not apply to the power to provide estate agency services.'.

No. 313, in page 182, line 10, leave out paragraph 5

No. 314, in page 182, line 30, at end insert—

'Pensions management etc.

8A. The power to establish and manage unit trust schemes is available only to a subsidiary of the society.'.

No. 316, in page 182, line 33, leave out from `provision' to end of line 34 and insert
'primarily to individuals; but this restriction does not apply to, nor in determining whether over any period insurance is being provided primarily to individuals is any account to be taken of income derived from, insurance relating to land which is to secure advances by the society.'.

No. 317, in page 182, line 41, leave out paragraph 12.

No. 318, in page 183, line 25, at end insert—

`Status as bankers

2A. —(1) So far as regards the provision by it of a service which is a qualifying banking service for the purposes of this paragraph a building society shall be treated for all purposes as a bank and a banker and as carrying on the business of banking or a banking undertaking whether or not it would be so treated apart from this paragraph.

(2) A building society provides a qualifying banking service for the purposes of this paragraph if, with or without any restriction, it provides either or both of the services falling within paragraph 1 or 3 of Part I.

(3) This paragraph does not affect the determination of any question as to the status of a building society as a bank or banker for other purposes.

Foreign exchange services to individuals

2B. — (1) For the purpose of determining whether a transaction consists in the provision of foreign exchange services to an individual it shall be presumed that a transaction does so consist if the value of the transaction is less than the standard amount.

(2) The standard amount is, subject to sub-paragraph (3) below, £5,000.

(3) The Commission, with the consent of the Treasury, may by order amend sub-paragraph (2) above so as to substitute for the amount for the time being specified in that sub-paragraph such other amount as it considers appropriate for the purposes of this paragraph.

(4) For the purposes of sub-paragraph (1) above the value of a transaction consisting in the provision of foreign exchange services is, where the society is selling the foreign currency, the sum paid to it and, where the society is purchasing the foreign currency, the sum paid by it.'

No. 319, in page 183, line 30, at end insert—
`3A. This Schedule is to be construed as relating only to the capacity of building societies or their subsidiaries to provide the services for the time being specified in it and not as making lawful any activity which would not be lawful apart from this Schedule.'.

No. 320, in page 183, in line 32, leave out from `services"' to 'Schedule' in line 33 and insert
`has the same meaning as in'.

No. 403, in page 183, line 37, at end insert
'"pension scheme" means a personal pension scheme (within the meaning of the Social Security Act 1986) or an occupational pension scheme (as defined in section 66(1) of the Social Security Pensions Act 1975 or in relation to Northern Ireland, Article 2(2) of the Social Security Pensions (Northern Ireland) order 1975) and the "provision of pensions" means the provision of benefits which are "money purchase benefits" within the meaning of that Act of 1986;'

No. 428, in page 183, line 37, at end insert—
'"the principal business of a building society" means the business of raising funds (whether by the issue of shares or receiving deposits) for the purposes of the society or of making advances secured on land;'.

No. 322, in page 183, line 38, after 'limit"', insert `, in relation to guarantees'.

No. 323, in page 183, line 41, at end add
': and "'unit trust scheme" has the same meaning as in the Financial Services Act 1986.'. —[Mr. Ian Stewart.]

Schedule 10

REQUISITE PARTICULARS OF INCOME OF RELATED BUSINESSES

Amendments made: No. 422, in page 185, leave out lines 13 to 27 and insert—

`PART I

REQUISITE PARTICULARS WHERE NO ADOPTION OF PART 11'.

No. 326, in page 185, line 29, leave out
'body or firm associated with'
and insert 'business associate of'.

No. 327, in page 186, line 9, leave out
'body or firm associated with'
and insert 'business associate of'.

No. 328, in page 186, line 34, leave out
'body or firm associated with'
and insert 'business associate of'.

No. 329, in page 186, line 43, leave out
`body or firm associated with'
and insert 'business associate of'.

No. 423, in page 187, line 6, at end insert—

'PART II

REQUISITE PARTICULARS ON ADOPTION OF THIS PART

Conveyancers

6. Where the business associate of the building society provides conveyancing services the requisite particulars of its business in any financial year are the following—

(a) the prescribed band within which falls the estimated number of cases in which it has provided conveyancing services in respect of an advance secured on land and the purchase of the land both to the society and to the borrower;
(b) the prescribed band within which falls the estimated number of cases in which it has provided the society (but not the borrower) with conveyancing services in respect of an advance secured on land;
(c) the prescribed band within which falls the estimated aggregate amount of the fees paid to it by the society or by or on behalf of the bon-ower for the provision of conveyancing services falling within sub-paragraphs (a) arid (b) above;
(d) the prescribed band within which falls the estimated aggregate of the amounts paid to it by the society by way of commission for its having introduced investment business to the society;
(e) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society in consideration of the provision of conveyancing services in respect of any land held by the society under section 6, 10, 15 or 17;
(f) the prescribed band within which falls the estimated aggregate of any fees paid to it by the society in consideration of the provision of management services to the society.

Valuers and surveyors

7. Where the business associate of the building society provides the services of surveying and valuing property the requisite particulars of its business in any financial year are the following—

(a) the prescribed band within which falls the estimated number of cases in which it has, in respect of any land

which is to secure an advance, surveyed the land or provided a valuation of it on behalf of the society or the borrower or both;
(b) the prescribed band within which falls the estimated number of cases in which it has, on behalf of the society (but not the borrower), surveyed any land which is to secure an advance or provided the society with a valuation of it;
(c) the prescribed band within which falls the estimated aggregate amount of the fees paid to it by the society or by or on behalf of the borrower for the provision of the services falling within sub-paragraphs (a) and (b) above;
(d) the prescribed band within which falls the estimated aggregate of the amounts paid to it by the society by way of commission for its having introduced investment business to the society;
(e) the prescribed band within which falls the estimated aggregate of any fees paid to it by the society in consideration of the provision of surveying or valuing services in respect of any property held by the society under section 6, 10, 15 or 17;
(f) the prescribed band within which falls the estimated aggregate amounts of any fees paid to it by the society in consideration of the provision of management services to the society.

Accountants

8. Where the business associate of the building society provides accountancy services the requisite particulars of its business in any financial year are the following—

(a) the prescribed band within which falls the estimated aggregate amount of the fees paid to it by the society for the provision of accountancy services; and
(b) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society in consideration of the provision of management services to the society.

Insurance agents, etc.

9. Where the business associate of the building society arranges for the provision of relevant insurance the requisite particulars of its business in any financial year are the following—

(a) the prescribed band within which falls the estimated aggregate of the amounts paid to it by the society or by way of commission by insurers in respect of relevant insurance effected by the society or by borrowers in compliance with the terms on which advances secured on land are made by the society; and
(b) the prescribed band within which falls the estimated aggregate amount of any fees paid to it by the society in consideration of the provision of management services to the society.

PART III

SUPPLEMENTARY

Power to prescribe bands for Part II particulars

10. — (1) The Commission, with the consent of the Treasury, may by order prescribe, for the purposes of the provisions of Part II of this Schedule, —

(a) series of numbers by reference to limits specified in the order, or
(b) series of monetary amounts by reference to limits so specified;

and, in any provision of Part II, "prescribed band" means, in realtion to cases, any series of numbers so prescribed for the purposes of that provision and, in relation to monetary amounts, any series of monetary amounts so prescribed for the purposes of that provision.

(2) The power conferred by this paragraph includes power—

(a) to prescribe different series of numbers or of monetary amounts for the purposes of different provisions, and
(b) to prescribe series of numbers or of monetary amounts such that the same number or amount is included in more than one series.

(3) The power to make an order under this paragraph is exerciseable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.

Interpretation

11. —(1) In this Schedule—
administrative services" means services falling within section 63(5);
business associate" and "associated", in relation to a building society, have the same meaning as in section 63;
financial year" means a financial year of the society with which the business associate is associated;
prescribed band" has the meaning given by paragraph 10(1) above; and
relevant insurance" means insurance falling within section 63(4)(d).

(2) In section 63 "the volume of the business", in relation to any business constituted by the provision of any services referred to in any provision of Part I or Part II of this Schedule means—

(a) in the case of a paragraph of Part I, the aggregate of all the fees and commissions which are the subject of the requisite particulars under that paragraph; and
(b) in the case of a paragraph of Part II, the aggregate of the amounts which are specified in orders under paragraph 10 above as the upper limits of the prescribed bands within which fall the estimated aggregates of the fees or commissions which are the subject of the requisite particulars under the provisions of that paragraph:. —[Mr. Ian Stewart.]

Schedule 11

AUDITORS: APPOINTMENT, TENURE, QUALIFICATIONS

Amendments made: No. 330, in line 40, leave out `court' and insert 'High Court'.

No. 331, in page 188, line 46, leave out 'court' and insert 'High Court'.

No. 332, in page 189, line 16, leave out 'court' and insert 'High Court'.

No. 333, in page 191, line 2, leave out 'in writing'.

No. 334, in line 25, leave out 'court' and insert 'High Court'.

No. 335, in line 30, leave out 'court' and insert 'High Court'.

No. 336, in line 44, leave out 'court' and insert 'High Court'.

No. 337, in page 192, line 22, leave out 'circulate' and insert 'send to'.

No. 338, in page 193, line 3, leave out 'court' and insert 'High Court'.

No. 339, in line 12, leave out 'court' and insert 'High Court'.

No. 340, in line 21, at end add—
'9. In the application of this Schedule to Scotland, references to the High Court shall be read as references to the Court of Session. '. —[Mr. Ian Stewart.]

Schedule 12

WINDING UP: SUPPLEMENTARY PROVISIONS

Amendments made: No. 341, in page 194, line 29, after 'be', insert 'given or'.

No. 405, in page 195, line 16, after '26', insert 'or 29'.

No. 406, in line 18, at end insert—
'6B. Section 605 (saving for rights of creditors and contributories) shall have the same effect in relation to a building society in the course of dissolution by consent as it has in relation to a society being wound up voluntarily;'.

No. 407, in line 28, at end insert—
'(2A) Section 519(7) shall have the same effect in relation to a building society in the course of dissolution by consent as it has in relation to a society being wound up voluntarily.'.

No. 408, line 35, leave out '(5)' and insert—

'7A. Section 524 (commencement of winding up by the court) shall have effect as if the following subsection were inserted in it, after subsection (1), —
(1A) If, before the presentation of a petition for the winding up of a building society by the court, an instrument for the dissolution by consent of the society as been placed in the public file of the society, the winding up of the society shall be deemed to have commenced on the date on which a copy of the instrument was placed on the file; and unless the court, on proof of fraud or mistake directs otherwise, all proceedings taken in the course of the dissolution shall be deemed to have been validly taken.".

7B. ' .

No. 342, in page 197, line 33, leave out '242' and insert `241'.

No. 343, in page 198, line 1, leave out `(e)' and insert `(d)'

No. 344, in page 198, line 22, leave out '6(6)' and insert `(6)'. —[Mr. Ian Stewart.]

Schedule 13

MERGERS: SUPPLEMENTARY PROVISIONS

Amendments made: No. 345, in page 199, line 5 leave out
'Subject to paragraph 3 below,'.

No. 346, in line 11, leave out from 'Commission' to 'in' in line 12.

No. 347, in line 15, leave out from `to' to end of line 16 and insert
'every member entitled to notice of a meeting of the society a statement'.

No. 348, in line 17, at end insert—
'(1A) A building society shall include the statement referred to in sub-paragraph (1) above in or with the notice to be sent to its members of the meeting of the society at which the resolutions required for the approval of the amalgamation or, as the case may be, the transfer are to be moved.
(1B) No statement shall be sent unless its contents, so far as they concern the matters specified in sub-paragraph (2) below, have been approved by the Commission.'.

No. 349, in page 199, line 31, leave out 'merger' and insert 'amalgamation'.

No. 350, in page 199, line 39, at end insert—
'(2A) The statement shall be sent so that any member to whom the building society sends notice of the meeting at which the resolutions to approve the amalgamation or transfer are to be considered will receive the statement not later than he receives the notice. '.

No. 351, in page 199, line 42, leave out from beginning to end of line 11 on page 200.

No. 352, in page 200, line 12, leave out Part II and insert—

'PART II

NOTIFICATION OF PROPOSALS FOR MERGER

Preliminary

'4. In this Part of this Schedule—
merger" means an amalgamation of building societies under section 82 or a transfer of all the engagements of one building society to another under section 83; and "merge" has a corresponding meaning;
merger proposal", in relation to a building society, means a proposal in writing, by another building society desiring to merge with it, for the societies to merge, with or without terms for the merger; and "proposer" has a corresponding meaning;
merger resolutions", in relation to a building society, means the resolutions required for the approval of a merger of the society with another building society under section 82(2) or 83(2);
merger statement" means a statement containing the requisite particulars of a merger proposal; and


requisite particulars", in relation to a merger proposal, means the particulars required by paragraph 5(2) below to be given in a merger statement.

Duty to notify members

5.—(1) Subject to sub-paragraph (3) below, it shall be the duty of a building society receiving a merger proposal to send, in accordance with this Part of this Schedule, a merger statement in respect of the proposal to every member entitled to notice of a meeting of the society.

(2) A merger statement must contain the following particulars—

(a) the fact that a merger proposal has been made, and
(b) the identity of the proposer;

with or without other particulars regarding the proposal.

(3) Sub-paragraph (1) above does not require a merger statement to be sent to members if the proposer has requested in writing that the requisite particulars are to be treated as confidential; and, where such a request is made and is at a later date withdrawn in writing, the society receiving the proposal shall, for the purposes of this Part of this Schedule, treat the proposal as having been received on that date instead of any earlier date.

6. —(1) A building society shall include in or with every notice of its annual general meeting a merger statement with respect to any merger proposal, other than a proposal of which notice has already been given under this paragraph—

(a) received by it during the period of 12 months ending with the ninth month of last financial year of the society before that meeting; or
(b) treated by paragraph 5(3) above as having been received by it during the last three months of that financial year;

and the society may also include, under this sub-paragraph, a merger statement with respect to any proposal received, or treated as received, by it after the end of either period.

(2) In any case where merger resolutions are to be moved at any meeting of a building society, every notice of the meeting shall have included in or with it a merger statement with respect to any merger proposal, other than a proposal of which notice has already been given under this paragraph, received by it more than 42 days before the date of the meeting.

Duty to notify the central office

7. —(1) Where a building society sends a merger statement to its members under paragraph 6 above in connection with a meeting of the society, it shall send a copy of the statement to the central office at least 14 days before the date of the meeting.

(2) The central office shall keep the copy of a merger statement received by it from a building society in the public file of that society.

Penalty

8. If default is made by a building society in complying with paragraph 6(1), 6(2) or 7 above, the society shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and so shall any officer who is also guilty of the offence.'.

No. 353, in page 203, line 11, leave out 'will' and insert 'intends to'.

No 354, in page 203, line 26, leave out 'he' and insert `the Commission'. —[Mr. Ian Stewart.]

Schedule 14

AMENDMENTS OF ACTS

Amendments made: No. 355, in page 203, line 28, at end insert—

`PART I

UNITED KINGDOM

Land Registration Act 1925 (c. 21)

In section 25(1) (proprietor's power to create charges) of the Land Registration Act 1925, in paragraph (b), for the words from "under" to "with" there shall be inserted "(within the meaning of the Building Societies Act 1986), in accordance with".'

No. 356, in page 204, line 22, at end insert–

'Stock Transfer Act 1963 (c. 18)

In section 1(4) of the Stock Transfer Act 1963 (simplified transfer of certain securities, not to apply to building society securities), for "1962" there shall be substituted "1986".

Industrial and Provident Societies Act 1965 (c. 12)

In section 31(b) of the Industrial and Provident Societies Act 1965 (authorised investments), for "society registered under the Building Societies Acts" there shall be substituted "building society within the meaning of the Building Societies Act 1986'.'.

No. 357, in line 24, leave out paragraph 3.

No. 358, in line 28, at end insert—

'Income and Corporation Taxes Act 1970 (c. 10)

(1) This paragraph amends the Income and Corporation Taxes Act 1970 as follows.

(2) In section 343(8) (arrangements for payment of tax by building societies) for "Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967" there shall be substituted "Building Societies Act 1986".

(3) In section 415(5) (contractual savings schemes) for "Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967" there shall be substituted "Building Societies Act 1986".'.

No. 359, in line 43, at end insert—

'Banking Act 1979 (c. 37)

. — This paragraph amends the Banking Act 1979 as follows.

(2) In section 34(1) (Treasury regulations controlling advertisements for deposits), after the word "Bank" there shall be inserted the words "and, in so far as they relate to building societies, the Building Societies Commission".

(3) In section 36(4) (exemption from restriction on use of description "banking services") there shall be inserted—

(a) after the word "Act", the words "or an authorised building society,", and
(b) after the words "the institution", the words "or society, as the case may be".

(4) In section 41(5) (consents for prosecutions), in paragraph (a) after the words "Public Prosecutions or", and in paragraph (b) after the words "Ireland or", there shall be inserted the words ", in the case of proceedings against a building society, the Building Societies Commission or, in any other case".

(5) In section 50(1) (definitions), after the definition of "the Bank" there shall be inserted the following definition—
building society" means a building society within the meaning of the Building Societies Act 1986 and, in that context, "authorised" has the meaning given by section 98(1) of that Act;".'.

No. 360, in line 43, at end insert—

'Consumer Credit Act 1974 (c. 39)

. — (1) This paragraph amends the Consumer Credit Act 1974 as follows.

(2) In section 16(1) (consumer credit agreement with certain bodies exempt from regulation) the words "or building society" shall be omitted and, after paragraph (f), there shall be inserted the words ", or

(g) a building society.".

(3) In section 16(3) (Secretary of State's duty to consult before making orders), after paragraph (d) there shall be inserted the words "or

(e) under subsection (1)(g) without consulting the Building Societies Commission and the Treasury.".

(4) In section 189(1) (definitions), for the definition of "building society" there shall be substituted the following definition—
"building society" means a building society within the meaning of the Building Societies Act 1986;".'

No. 361, in page 204, line 43, at end insert—

'Local Government Act 1972 (c. 70)

In Schedule 12A (access to information: exempt information) to the Local Government Act 1972—

(a) in Part II, in paragraph 2(d) for "1962" there shall be substituted "1986"; and
(b) in Part III, in paragraph 1(1), after the definition of `protected informant' there shall be inserted the following definition—

"'registered', in relation to information required to be registered under the Building Societies Act: 1986, means recorded in the public file of any building society (within the meaning of that Act);".

Charging Orders Act 1979 (c. 53)

In section 6(1) (interpretation) of the Charging Orders Act 1979, in the definition of "building society" for "1962" there shall be substituted "1986".

Finance Act 1982 (c. 39)

. —-(1) This paragraph amends the Finance Act 1982 as follows.

(2) In section 28(5) (variation of terms of repayment of certain loans), for "Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967" there shall be substituted "Building Societies Act 1986".

(3) In paragraph 2(4), 4(1) and 14(1) of Schedule 7 (deduction of tax from certain loan interest), for "Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967" there shall be substituted "Building Societies Act 1986".

Companies Act 1985 (c. 6)

(1) This paragraph amends the Companies Act 1985 as follows.

(2) In section 295(3) (disqualification orders against directors of companies; meaning of "company"), after "Part XXI" there shall be inserted "and a building society (within the meaning of the Building Societies Act 1986).".

(3) In section 302(4) (provision against undischarged bankrupt acting as director, etc.; meaning of "company"), after "unregistered company" there shall be inserted ", a building society (within the meaning of the Building Societies Act 1986)".'.

No. 362, in page 205, line 39, at end add—

'PART II

NORTHERN IRELAND

Payment of Wages Act (Northern Ireland) 1970 (c.12 N.I.)

.—(1) This paragraph amends the Payment of Wages Act (Northern Ireland) 1970 as follows.

(2) In section 1(3) (authorised means of payment of wages), after paragraph (a) there shall be inserted—
(aa) payment into an account at a building society, being an account standing in the name of the person to whom the payment is due, or an account standing in the name of that person jointly with one or more persons,".

(3) In section 2(1) (requirements applicable to authorised payments), after "bank" there shall be inserted "or building society".

(4) In section 7(1) (interpretation) —

(a) in the definition of "account", after "way)" there shall be inserted "and, in relation to a building society, includes a share account and a deposit account (however described)",
(b) after the definition of "bank" there shall be inserted—

"building society" means a building society within the meaning of the Building Societies Act 1986;", and

(c) in the definition of "branch", after "head office of the bank" there shall be inserted " and, in relation to a building society, includes the principal office of the society;".

Private Streets (Northern Ireland) Order 1980 (S.I. 1980/1086 (N.I.12))

. In Article 33 (security not to be deemed prior mortgage under Building Societies Acts) of the Private Streets (Northern Ireland) Order 1980 for the words from "section 32" where they first occur onwards there shall be substituted "section 11(2)(d) or (4) of the Building Societies Act 1986".

Housing (Northern Ireland) Order 1981 (S.I. 1981/156 (N.I.3))

. — (1) This paragraph amends the Housing (Northern Ireland) Order 1981 as follows.

(2) In Article 2(2) (interpretation) after the definition of "building regulations" there shall be inserted—
 "building society" means a building society within the meaning of the Building Societies Act 1986.".

(3) In Article 156(5)(b) (consultations by the Department regarding forms of indemnity agreements) for "Registrar of Friendly Societies for Northern Ireland" there shall be substituted "Building Societies Commission".

(4) For paragraph 1 of Schedule 10 there shall be substituted—

1. Building Societies.".

Property (Discharge of Mortgage by Receipt) (Northern Ireland) Order 1983 (S.I. 1983/766 (N.I. 9),

. In Article 3(10) of the Property (Discharge of Mortgage by Receipt) (Northern Ireland) Order 1983, after "applies" in the definition of "mortgage" there shall be inserted "and, subject to paragraph 4(7) of Schedule 4 to the Building Societies Act 1986, does not include a mortgage to which that paragraph 4 applies.".

Housing (Northern Ireland) Order 1983
(S.I. 1983/1118 (N.I. 15))

. In Article 3(4) of the Housing (Northern Ireland) Order 1983, in the definition of "building society" for the words from "1962" onwards there shall be substituted "1986".

No. 363, in line 39, at end add—

'Companies Act (Northern Ireland) 1960 (c. 22 N.J.)

In section 178(3) of the Companies Act (Northern Ireland) 1960 (provision against undischarged bankrupt acting as director, etc.; meaning of "company"), after "unregistered company" there shall be inserted ", a building society (within the meaning of the Building Societies Act 1986).".

Industrial and Provident Societies Act (Northern Ireland) 1969 (c. 24 N.I.)

In section 31(b) of the Industrial and Provident Societies Act (Northern Ireland) 1969 (authorised investments) for "society registered under the Building Societies Acts" there shall be substituted "building society within the meaning of the Building Societies Act 1986.".

Companies (Northern Ireland) Order 1978 (S.1. 1978/1096 (N.I. 12))

In Article 55(4) of the Companies (Northern Ireland) Order 1978 (disqualification orders against directors of companies), in the definition of "company" at the end there shall be inserted "and a building society (within the meaning of the Building Societies Act 1986).".'.—[Mr. Ian Stewart.]

Schedule 15

REPEALS

Amendments made: No. 364, in page 206, leave out lines 4 and 5 and insert—

'REPEALS: GENERAL'.

No. 365, in line 20, leave out 'paragraph 3A' and insert 'paragraphs 3A and 7'.

No. 366, in page 206, line 22, at end insert—

'1974 c.39.
The Consumer Credit Act 1974
In section 16 in subsection (1) the words "or building society," and, in subsections (l)(e) and (3)(c), the word "or",'.

No. 367, in page 206, line 22, at end insert—

'1965 c.32.
The Administration of Estates (Small Payments) Act 1965.
In Schedules 1 and 3, the entries relating to the Building Societies Act 1962.


1969 c.46.
The Family Law Reform Act 1969.
In Schedule 1, the entry relating to the Building Societies Act 1962.


1970 c.10.
The Income and Corporation Taxes Act 1970.
In section 343(5), the words 'union or'.


1974 c.46.
The Friendly Societies Act 1974.
In Schedule 10, paragraph 9.


1974 c.49.
The Insurance Companies Act 1974.
In Schedule 1, the entries relating to the Building Societies Act 1962.


1979 c.37.
The Banking Act 1979.
In paragraph 6 of Schedule 1, the words from "within" to the end.




In Schedule 6, paragraphs 6, 7, 16 and 17.


1982 c50.
The Insurance Companies Act 1982.
In Schedule 5, paragraphs 3, and 5.


1984 c.28.
The County Courts Act 1984.
In Schedule 2, paragraph 26.

1985 c.9.
The Companies Consolidation (Consequential Provisions) Act 1985.
In Schedule 2, the entries relating to the Building Societies act 1962.


1985 c.58.
The Trustee Savings Banks Act 1985.
In Schedule 1, paragraph 11(2)(a) and so much of that sub-paragraph as relates to the sections 59 specified therein.'.

No. 368, in page 206, line 29, at end insert—

'PART II

REVOCATION EXTENDING TO GREAT BRITAIN

Number
Title
Extend of revocation


S.I. 1981/1488.
The Building Societies (Authorisation) Regulations 1981.
The whole Regulations.'

No. 369, in page 207, line 1, leave out 'II' and insert 'III'.

No. 370, in page 207, line 8, at end insert—

'1967 c. 5 (N.I.).
The Administration of Estates (Small Payments) Act (Northern Ireland) 1967.
In Schedule 1, the entry relating to the Building Societies Act 1874.


1969 c. 24 (N.I.).
The Industrial and Provident Societies Act (Northern Ireland) 1969.
In section 101(1), the definition of "Building Societies Acts".


1969 c. 28 (N.I.)
The Age of Majority Act (Northern Ireland) 1969.
In Schedule 1, the entry relating to the Building Societies Act (Northern Ireland) 1967.'.

No. 371, in page 207, line 28, at end insert—

'S.I. 1981/156 (N.I.3.).
The Housing (Northern Ireland) Order 1981.
Article 156(6) In Part II of Schedule 2, the entry relating to the Building Societies Act (Northern Ireland) 1967.'.

No. 372, in page 207, line 28, at end insert—

'S.R. 1982/155 (N.I.).
The Building Societies (Authorisation) Regulations (Northern Ireland) 1982.
The whole Regulations.'.

No. 373, in page 207, line 33, at end insert—

'S.I.1983/1118 (N.I. 15).
The Housing (Northern Ireland) Order 1983.
In Schedule 10, the entry relating to the Building Societies Act (Northern Ireland) 1967.'.

No. 404, in page 207, in line 34, leave out '14' and insert '13'—[Mr. Ian Stewart.]

Schedule 16

TRANSITIONAL AND SAVING PROVISIONS

Amendments made: No. 374, in page 208, line 41, leave out lines 41 and 42 and insert—

'(a) retain and register one copy of the memorandum and of the altered rules,
(b) return another copy to the secretary of the society, together with a certificate of registration, and
(c) keep another copy, together with the record of the specified date sent to it under sub-paragraph (3) above and a copy of that registration certificate, in the public file of the society .' .

No. 375, in page 209, line 33, leave out from 'shall' to end of line 34 and insert
`retain and register a copy of the memorandum and of the altered rules'.

No. 376, in line 34, at end insert—

`(4A) On registering a copy of the memorandum and of the altered rules under sub-paragraph (4) above, the central off ce shall—

(a) return another copy to the secretary of the society, together with a certificate of registration, and
(b) keep another copy, together with the record of the specified date sent to it under sub-paragraph (2) above and a copy of that certificate, in the public file of the society .'.

No. 377, in page 210, line 2, leave out from 'If' to `copies' in line 3 and insert
`the central office has not, before the end of the transitional period, received from an existing building society'.

No. 378, in line 9, leave out from 'If' to 'copies' in line 10 and insert
`the central office has not, before the end of the transitional period, received from an existing building society'.

No. 379, in line 20, leave out from 'prepare' to end of line 22 and insert
`three copies of a memorandum and of rules for the society and shall—

(a) retain and register one copy,
(b) return another to the secretary of the society, together with a certificate of registration, and
(c) keep another copy, together with a copy of that certificate, in the public file of the society.'.

No. 380, in line 41, after '6.', insert '—(1).'.

No. 381, in line 42, leave out 'or loans'.

No. 382, in page 211, line 4, at end insert—
'(2) The central office shall record in the public file of each building society to which sub-paragraph (1) above applies the fact that, by virtue of that sub-paragraph, the society is to be treated as authorised for the purposes of this Act.'.

No. 383, in line 4, at end insert—

'Anticipation of powers' declaratory provision

.—(1) It is hereby declared that building society has had, as from 19th December 1985, power, for the purposes of any power conferred by this Act or, building societies or building societies of its description, to do such things, subject to sub-paragraph (2) below, as are reasonably necessary to enable it—

(a) to decide whether or not, and to what extent, to exercise and in the case of an adoptable power to adopt) the power, and
(b) if it decides to exercise the power, to exercise it as from the date when it becomes exercisable by the society.

(2) Sub-paragraph (1)(b) above does not authorise a society—

(a) to make contracts, other than conditional contracts, for the acquisition of land, the acquisition of a business or the acquisition of shares in any company if that company offers the public any service or facility within the power
(b) to issue invitations to members of the society or the public to apply for any power to be exercised for their benefit, or
(c) to retain shares in a company which offers the public any service or facility within the power;

and, in this sub-paragraph, "conditional", in relation to contracts with respect to the exercise of a power, means conditional on the power's becoming exercisable by the society.

(3) The power conferred by this paragraph, and activities carried on under it, for the purposes of an adoptable power are not to be treated a included in, or in activities comprised in, that adoptable power for the purposes of paragraph 7 of Schedule 16 to this Act.'

No. 384, in page 213, line 20, at end insert—
'(6A) Nothing in the foregoing provisions of this Schedule implies that it is improper for any of the following, that is to say—

(a) the Chief Registrar or any assistant registrar of the central office,
(b) the assistant registrar of friendly societies for Scotland,
(c) the registrar of building societies for Northern Ireland, or
(d) the Commission,

to give to a building society or building societies generally an indication of the action the Commission might or might not take


in exercising its functions under this paragraph; and no decision of the Commission under this paragraph shall be liable to be set aside by reason of the indication having been given.'.

No. 385, in page 214, line 4, after 'age', insert
, or the compulsory retirement age (if any), as the case may be,'.

No. 386, in line 18, leave out from beginning to 'given' and insert
'the compulsory retirement age" and "the normal retirement age" have the meanings'.

No. 387, in page 215, line 27, after 'copy', insert
', together with a copy of that certificate,'.

No. 388, in line 39, leave out sub-paragraph (7). — [Mr. Ian Stewart.]

SCHEDULE 17

PROVISION OF CONVEYANCING SERVICES BY RECOGNISED INSTITUTIONS

Amendments made: No. 410, in page 216, line 15, at end insert—
'"recognised practitioner" means a sole practitioner for the time being recognised under this Schedule;'.

No. 411, in line 17, at end insert—
'"sole practitioner" means an individual carrying on a business or profession otherwise than as a member of an unincorporated association;' .

No. 412, in page 220, line 43. at end insert—

'Power of Lord Chancellor to make recognition rules in the case of sole practitioners

12. —(1) The Lord Chancellor may, in accordance with the provisions of this paragraph, make rules with respect to the recognition by him of sole practitioners as being suitable to undertake the provision of conveyancing services.

(2) Subject to sub-paragraph (3) below, paragraphs 2 to 6 and 8 and 9 above shall apply in relation to the recognition of sole practitioners as they apply in relation to the recognition of institutions, and accordingly, in the application of those paragraphs in accordance with this sub-paragraph, any reference to an institution shall have effect as if it were a reference to a sole practioner and any reference to a recognised institution shall have effect as if it were a reference to a recognised practitioner.

(3) In the application of those paragraphs in accordance with sub-paragraph (2) above—

(a) the reference in paragraph 2(2)(b) to negligence, fraud or other dishonesty on the part of officers or employees of recognised institutions shall have effect as if it were a reference to negligence, fraud or other dishonesty on the part of recognised practitioners or their employees; and
(b) paragraph 6(3)(a) shall be omitted.

Restrictions on conveyancing by unqualified persons not to apply to recognised practitioners in relation to acts done by their employees

13. Section 22(1) of the Solicitors Act 1974 shall not apply to an individual by reason of any act done by any employee of his, if at the time it was done, the individual was a recognised practitioner.

Penalty for pretending to be a recognised practitioner

14. — (1) A person shall not describe himself or hold himself out as a sole practitioner for the time being recognised under this Schedule unless he is so recognised.

(2) Any person who contravenes sub-paragraph (1) above shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale. ' . —[Mr. Ian Stewart.]

Mr. Ian Stewart: I beg to move, That the Bill be now read the Third time.
Now that we have reached the end of the proceedings in this House on the Building Societies Bill, I should like to express my thanks to all those who have been involved in its passage through the House for the constructive and good humoured way in which the proceedings have been conducted. It has been greatly to the advantage of the legislation.
I do not apologise for the fact that the Government have introduced more than 1,000 amendments to the Bill. It is an exceedingly complicated piece of legislation which completely recasts the law for building societies which has been on the statute book, in generally the same condition, for over 100 years. The number of amendments is testimony to the care that we have tried to take in order to respond to all the points that have been raised in the process of consultation and discussion and, indeed, in response to the many points that were put forward by hon. Members in Committee. We have gone rather rapidly through a number of groups of Government amendments, and we have been able to do so because the matters were fully debated in Committee and the amendments meet undertakings that we gave.
I want to thank my hon. Friend the Under-Secretary of State for the Environment, the hon. Member for Ealing, Acton (Sir G. Young), for the enormous amount of work that he has done and for his help in taking the Bill through the House. I greatly appreciate his support, both professional and personal. I also want to thank my hon. and learned Friend the Solicitor-General for coming in at one or two crucial moments in our proceedings to deal with subjects on which I do not profess to have any skill or expert knowledge.
My hon. Friends and other members of the Committee all approached the legislation in a most helpful way. I do not at all take it in bad part that they were sometimes fairly rough with me. I only hope and believe that the Bill is in better shape as a result of the process of give and take that we have been through.
I thank the hon. Member for Thurrock (Dr. McDonald) for the way in which she has handled the Bill on behalf of the Opposition. Like myself, she had difficult clauses of the Finance Bill to deal with last night, and we shall be doing so again tomorrow night. Dealing with the Building Societies Bill in between has not been an easy matter. I compliment her on the way in which she has done so.
I also want to mention the hon. Member for Ipswich (Mr. Weetch), who has taken up temporary residence on the Opposition Front Bench for the purposes of this Bill. His interest in the subject over many years is well known to the House and he has acquitted himself with considerable distinction. I hope that he will continue to occupy his present position in some other capacity.
I want in particular to express my gratitude to the chief registrar and the staff of the registry, who, in addition to their routine work, which is an important range of duties, have devoted an enormous amount of time during the past three years to preparing details of this legislation. Without their ready assistance, which I know has placed a great strain on their resources, it would not have been possible to get the Bill into this sort of shape.
On 21 January I announced that Mr. Herbert Walden had agreed to serve as a part-time member of the Building Societies Commission. I am glad to be able to announce today that Mr. Sidney Procter and Mr. Geoffrey Sammons


have also accepted invitations from my right hon. Friend the Chancellor of the Exchequer to be part-time members of the Building Societies Commission.
Mr. Sammons retired as senior partner of the firm of Allen and Overy in May this year, and his long experience of legal matters should be of considerable value to the commission. Mr. Procter retired as chief executive of the Royal Bank of Scotland Group in 1985. He is currently acting as adviser to the Governor of the Bank of England on banking supervision and will continue to do so in future, providing an important link between building society supervision and banking supervision. The Royal Bank of Scotland has agreed to allow him to relinquish his post as vice chairman with effect from 1 January 1987 to enable him to take up that appointment, and I am grateful to it for doing so.
I can also announce that Mr. Ronald Devlin, currently assistant registrar of friendly societies, will be a full-time member of the Building Societies Commission when it is established. Clearly the commission will have a most important part to play in the implementation of this legislation.
Finally, I should like to thank the parliamentary draftsmen for really heroic efforts in completing the Bill, and also the officials in the Treasury, who, during nearly three years of intensive work, have had to contend with an awkward Minister who questioned every proposal that they put forward. It was an enormous labour for them and they have done an outstanding job. In that tribute I include also the Building Societies Association, whose representatives and advisers have made themselves readily available to members of the Committee and other hon. Members, and I am sure that the Bill is in a much better shape as a result.
This is the most fundamental legislation on building societies for over a century. It gives them new powers and will enable them to compete more effectively in a changing marketplace. The emphasis will still be placed firmly on the provision of services for savers for house

purchase, but I hope that the Bill will also enable building societies to face the future in the confidence that they will be able to continue to serve the public as effectively as they have done for many generations. I am sure that they have the best wishes of us all in meeting the new challenges that they face.
I think that the Bill leaves the House with the united support of hon. Members on both sides of the Chamber and of the building societies themselves, and I hope that it will not be too long before it reaches the statute book.

Dr. McDonald: First, I echo the Minister's words, because I believe that the Bill provides a framework for the building societies in a competitive market. As the Economic Secretary to the Treasury knows, we still have certain reservations about the Bill, but we wish the building societies well. We have emphasised during our debates the importance of their commitment to housing and their meeting of that social need in the past. We hope that in future the societies will remain as mutual organisations and will continue primarily to meet the housing need.
I thank the Minister for his kind remarks about the conduct of the Bill in Committee, and I thank the Building Societies Association for the assistance that it gave to all members of the Committee during the passage of the Brill through Parliament. I thank my hon. Friend the Member for Ipswich (Mr. Weetch) for agreeing to come on the Opposition Front Bench during the course of the Bill's passage through the House, for all the assistance that he has given me and for the wit that he has brought to the conduct of our debates. Perhaps we are not as anxious as the Minister seems to be for the Bill to return to this place and to face it all over again when we consider Lords amendments, but no doubt we shall face that prospect. We wish the building societies well.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

Orders of the Day — Education (Assisted Places) (Amendment) Regulations

The Parliamentary Under-Secretary of State for Education and Science (Mr. Robert Dunn): I beg to move,
That the draft Education (Assisted Places) (Amendment) Regulations 1986, which were laid before this House on 21st May, be approved.
Hon. Members may remember that last year we came to the conclusion that the original regulations had become rather cumbersome and a somewhat daunting bundle. For the convenience of all concerned, we introduced a single set of consolidated regulations.
As hon. Members will have noted, there has been little need this year for any substantive amendment to the consolidated regulations of 1985. The amendment regulations before the House are designed mainly to assist the smooth running of the scheme, although very little has appeared to need changing. As in previous years, provision is also made for the appropriate revaluation of parental income scales.
To provide some context for this debate on the amendment of the regulations, I should like to speak briefly about the nature of the assisted places scheme as it operates under the present arrangements.
More than 21,000 children are receiving assistance under the assisted places scheme at 226 of the best independent schools in this country. High academic standards are a prerequisite of schools' participation in the scheme.
Of those now receiving assistance with their fees, over 47 per cent. come from families whose gross combined income per year is less than £7,300. The scale for determining the amount of fee remission is intentionally a tough one and only those families with incomes below £6,376 in the current year qualify for completely free places. Even so, for the school year 1985–86 over 39 per cent. of the assisted pupils qualified for full remission of fees. With this evidence before me, I stand ready to refute any claim that the assisted places scheme operates to subsidise the rich. Nor do I accept that it is a means of supporting children, albeit from low-income families, who would have attended independent schools even if the assisted places scheme did not exist. The principal regulations require all participating schools to ensure that at least 60 per cent. of their assisted pupils come from the maintained sector.

Mr. David Sumberg: While my hon. Friend is on the topic of participating schools, may I ask whether he is aware that there is considerable concern about the qualifications for schools that are allowed to participate? May I instance——

Mr. Deputy Speaker (Mr. Harold Walker): Order. The hon. Gentleman had better not. He should address himself to what is in the regulations rather than to the merits of the scheme itself.

Mr. Dunn: I think that I know what my hon. Friend is getting at. I shall attend to it in due course.
Only four of the participating schools have had difficulty in attracting sufficient suitably qualified applicants from state schools.
It is our view that the scheme is operating very successfully, and as evidence and support of that contention I would point to the consistently low-income profiles of the families involved, the successful recruitment of pupils from the maintained sector and the redistribution of quotas away from poor recruiter schools towards successful ones. For the Government, the participating schools, the pupils and the parents who benefit, and the general public, the assisted places scheme is a resounding success.
I refer to the text of the draft regulations. Regulations 1 and 2 are concerned only with nomenclature, and I shall not trouble hon. Members with comment on them. Regulation 3 does two things. It inserts a missing preposition in regulation 21 of the principal regulations. More notably, it increases the period allowed to the Secretary of State to respond to requests from the participating schools for increases in their fees. At present the schools must give the respective Secretaries of State one month's written notice of intended fee increases. The Secretary of State concerned then has only seven days in which to query the increase. We have found that administratively that has proved difficult, and we now propose an extension from seven to 14 days.
Regulation 4 is put forward to close a legal loophole that was brought to our attention by a number of the participating schools. The principal regulations are designed essentially to treat the assisted placeholder's current family as a family unit for the purposes of assessing income annd therefore the appropriate level of fee remission in individual cases. However, the principal regulations do not at present cover circumstances whereby an unmarried mother subsequently marries a man who is not the father of her child.

Mr. Michael Stern: My hon. Friend has touched on a matter that is of concern in the context of the recent Treasury Green Paper on reform of personal taxation, which is not wholly irrelevant, in that it seeks to address the problem of it being an advantage for people to remain unmarried. It may have occurred to my hon. Friend that under the assisted places regulations as drafted there is a large incentive to someone contemplating taking up an assisted place similarly to remain unmarried.

Mr. Dunn: I understand my hon. Friend's point. Through the change in the regulations, we have tried to deal with the anomaly whereby an unmarried mother with a child, who then marries a millionaire could find that the income of the millionaire was not taken into account for the assessment of fee remission. Regulation 4 amends this anomaly and allows that husband's income to be taken into account in determining eligibility and level of assistance under the scheme. I am sure that the House accepts that this is sensible, placing all family units on the same footing.
Regulation 4(2) is also an addition to the definition of "parent" for the purposes of the scheme and takes account of the new legal definition of "custodian" introduced under those sections of the Children Act 1975 which were implemented earlier this year. The principal APS regulations are being amended so that children who are the subject of custodianship orders and their legal custodians are placed on exactly the same footing as adopted children and their adoptive parents.
Regulation 5 covers the rules for assessing income. Any allowance paid by a local authority to an assisted pupil's


custodian will be ignored for APS purposes. Regulation 5 also updates the relevant income tax legislation in the principal regulations.
Regulation 6 provides for the updating of the income scale used for assessing the amount of parents' contributions towards the fees — the threshold below which parents pay nothing towards fees being raised from £6,376 to £6,806.
I am confident that the changes that I have just described will allow the continuing smooth running of the assisted places scheme. Indeed, they can only enhance what is already highly successful and popular.

Mr. Andrew F. Bennett: I am sure that the House is well aware that the Opposition strongly object to the assisted places scheme. It is a clear symbol of the divisive and destructive approach that we have seen from this Government since 1979 in their policies on education and their attitude to state education. When almost everything in state education was going wrong because of a lack of resources and a lack of Government interest, they seemed to do everything they could to nurture their assisted places scheme. No doubt it is because they believe that education should be elitist and they want to use it to confer privilege on a few rather than to offer higher educational standards to all the children of Britain. There is no need for me to go over again our opposition to the assisted places scheme.

Mr. Sumberg: On a point of order Mr. Deputy Speaker—

Mr. Deputy Speaker: May I anticipate the hon. Gentleman's point of order? I hope that the hon. Member for Denton and Reddish (Mr. Bennett) will now address himself to the document before the House.

Mr. Bennett: Yes, Mr. Deputy Speaker, but I draw your attention to the fact that in introducing the regulations the Minister made a general comment about them. Perhaps I may just complete one or two general remarks, which might speed up our proceedings. There is very little support in Britain for the assisted places scheme. People want the privilege of good education for all our children and not for a select few.
I shall now turn to the regulations. It is rather interesting to note that the first time round the Government got the regulations wrong. It might have been of interest to us if the Minister had explained why he got them wrong the first time and had to come back with a second set. I put that question before Government Members become too critical. He might also have explained to us why he picked an increase of virtually 7 per cent. in the allowances for income. I can see that there is some relationship to average earnings, but I suggest that perhaps the income increases do not take into account people on very low incomes. The Minister might like to say something about that.
I notice that the new Secretary of State wants more time to think about decisions in education, because he is asking for 14 days rather than seven. I had hoped that he would move in the opposite direction and speed up the Department's consideration, especially of things like local authority proposals for the reorganisation of schools. I am sure that the Minister is aware of the considerable backlog of decisions there, and it would be better if the

Government came forward with proposals to reduce the time that it takes to reach ministerial decisions rather than to increase that time.

Mr. Sumberg: What has this got to do with the draft regulations?

Mr. Bennett: If the hon. Gentleman will look at them, he will find that there is a regulation, to which the Minister referred, which suggests that the Government should have 14 rather than seven days in which to respond. Mine seems a perfectly valid point, but if the hon. Gentleman wants to continue to remark from a sedentary position and keep the House here longer, he is welcome to do so.
The Minister mentioned parents and guardians, the regulations in respect of which, if we are to have an assisted places scheme at all, represent a sensible tidying up. Will the Minister answer a question that we asked the last time around when we considered the regulations, but which he did not answer? What evidence does he have about the rate of pay for teachers in the independent sector? There is some evidence to suggest that the rate of pay——

Mr. Deputy Speaker: Order. The hon. Gentleman is now straying from the draft regulations.

Mr. Bennett: With the greatest of respect, Mr. Deputy Speaker, one of the regulations mentions the fact that the Government want to extend the time which they have to consider requests from schools involved in the scheme to put up their fees. Whether an increase in fees is legitimate depends on rates of pay and other matters. If the Government——

Mr. Deputy Speaker: Order. If we start a debate on levels of teachers' remuneration now, we are likely to be here for a long time. We ought to stick to what is in the draft regulations.

Mr. Bennett: Perhaps I may refer you, Mr. Deputy Speaker, to the part of the regulations which would increase the amount of time from seven to 14 days——

Mr. Deputy Speaker: Order. There is nothing in the draft regulations about teachers' pay and we must not get involved in a debate on that topic. If the hon. Gentleman returns to that matter, I shall have to rule him out of order.

Mr. Bennett: I accept that I must not debate teachers' pay, but may I suggest that it would be helpful if the Government could give us the information for which I have asked? They ought to have such information to make decisions about whether it is reasonable to increase fees. When we asked the Minister for this information previously, he said that he had none about the level of remuneration of teachers in independent schools. I am now pressing him to produce that information.
When taking account of a request to increase fees, the Government also take account of the pupil:teacher ratio in assisted places schools and the provision of books and materials

Mr. Richard Hickmet: On a point of order, Mr. Deputy Speaker. I ask this with the greatest possible respect to you. Is there one rule for Back Benchers and another for Front Bench spokesmen? The hon. Gentleman has not directed any of his remarks to the draft regulations.

Mr. Deputy Speaker: It is not in order for the hon. Member to criticise the Chair, directly or indirectly, but


there is nevertheless substance in his complaint. The merits of the assisted places scheme have been debated and decided upon by the House. We are not debating them tonight. We must confine the debate to what is in the draft regulations. I hope that the hon. Member for Denton and Reddish will do that.

Mr. Bennett: I am trying to do that, Mr. Deputy Speaker. I am also trying to tell the Government that, if they are considering taking more time to examine requests for increases in fees, they should take account of the difference in standards as between the privilege that the Government are conferring on a few children in assisted places and the generality. It would be rather better if they insisted that public expenditure on assisted places was exactly the same as public expenditure on places——

Mr. Sumberg: On a point of order, Mr. Deputy Speaker. When I tried to intervene earlier you ruled me out of order. Although I do not seek in any way to challenge that, I must protest at the way in which the hon. Member for Denton and Reddish (Mr. Bennett) is using the debate as an excuse to attack the whole concept of the assisted places scheme. That seems to be an abuse of the procedure of the House. I ask you to deal with him as firmly as you dealt with me.

Mr. Deputy Speaker: Order.

Mr. Clement Freud: Further to that point of order, Mr. Deputy Speaker. May I remind you that the Minister spent much of his speech extolling the virtues of the assisted places scheme without any mention of the draft regulations and you allowed him to carry on?

Mr. Deputy Speaker: These are difficult matters in which the Chair must use some judgment. The Minister strayed beyond the narrow terms of the regulations. I was anxious at the time about that and I reproached the hon. Gentleman in an attempt to keep the debate in line with the regulations which are before the House. I hope that the hon. Member for Denton and Reddish (Mr. Bennett) will now, having had a fair run, and having made a number of points, confine himself to the regulations.

Mr. Bennett: I was trying to bring my remarks to a close. If the Minister wants to raise the fact that I am the Chairman of the Joint Committee on Statutory Instruments that dealt with the original regulations and the fact that they were ultra vires, I would stress to him that we are concerned with the vires of the order and not its merits. The purpose of this debate is to deal with the merits of the order. Although I cannot find many merits in the order, I was trying to do that as briefly as possible. It seems that some hon. Members want to make a meal out of the order.
As this is the Secretary of State's first occasion to be on the Government Front Bench in his new role, he should get rid of the assisted places scheme as it is one of the divisive parts of Tory party policy. He shold get rid of that as he got rid of Mr. Stuart Sexton, and return to mainstream Tory policy, to things like the Education Act 1944 and R. A. Butler and not continue with the idea of assisted places.

Mr. Stern: On a point of order, Mr. Deputy Speaker. You have warned the hon. Member for Denton and Reddish (Mr. Bennett) on a number of occasions about

straying from the subject, but he is still doing that. Will you, in the interests of the general amity of the House —we are all interested in the regulations and that is why we are here tonight—ask the hon. Gentleman to confine his remarks to the regulations?

Mr. Deputy Speaker: Order. I accept the hon. Gentleman's point. I allowed the hon. Member for Denton and Reddish to go on because I thought for one second that he was about to resume his seat. I thought it better to allow him to do that rather than to provoke him into further comment.

Mr. Bennett: I had only one more sentence to say. I wanted to stress that, as objectionable as the Opposition find the assisted places scheme, we do not think that it would be especially useful to divide the House tonight.

Mr. Peter Griffiths: It would be a tragedy if the merits of the regulations were lost because points have been made which are not strictly relevant to the debate, which is, after all, limited in time.
I am pleased to note the way in which the regulations show that the Department is prepared to make those changes that are a necessary consequence on changes elsewhere, and that they seek to provide an adequate definition of the person responsible for the child's education. These factors encourage us to believe that the scheme is being properly supervised and considered.
I want to confine my remarks to the changes that have been made in the income scales for parents and the rates at which they make their contributions to the education of the children. In his introduction my hon. Friend did not make it clear on what basis the changes had been made. As the income levels designated in the regulations will apply in the next education year, when the increase will be considerably above the rate of inflation, there is an element of generosity. However, some of us might think it inadequate. I should like my hon. Friend to confirm that that generosity was the intention of the Department and not something that happened by accident when a figure was, as it were, plucked out of the air.
Although my constituency is in the south of England, the people there have quite low wage rates. The Government should recognise that the levels at which parental contributions are fixed are significant in cities such as Portsmouth, which is akin to many of the industrial cities of the north in its social and economic problems. If my hon. Friend can assure us that it is the intention over a period to change the assessment of parental contributions to benefit parents, that will be welcomed in the less prosperous parts of the country, particularly by parents whose incomes are below average. It is they who make the greatest sacrifice for their children to be educated under the scheme.

Mr. Clement Freud: Participating in this debate is akin to dancing barefoot on razor blades. Mr. Deputy Speaker, you very wisely, I thought, told the first two speakers that they could have a short, fair run. I should like your indulgence to pursue a similar course.
We are talking about draft regulations that are intended to extend a scheme that I do not like. I want to say exactly


what we find objectionable about the assisted places scheme, and find even more objectionable in view of the draft regulations, which exacerbate the evil.

Mr. Deputy Speaker: Order. If the hon. Gentleman will address himself to the merits of the regulations before the House he will be in order. He heard the criticisms that preceded his speech. He will be out of order if he seeks to debate the merits of the assisted places scheme as such. I remind him again that the House debated that scheme and made its decision on it a long time ago. We are now debating amendments to that scheme, and not the scheme itself. The hon. Gentleman should confine himself to the amendments.

Mr. Freud: I thought that what I had said, Mr. Deputy Speaker, had made it clear that I was talking about the draft regulations which extend what we considered an evil. These draft regulations facilitate the taking of money from the hard-pressed, maintained sector of education, to transfer children to the not necessarily better private sector. I will not buy their hype and call it the independent sector.
The draft regulations comes from a Government Department with responsibility for the public sector of education, yet it slaps its customers in the face by depriving them of their most gifted assets—the children. I do not go along with a system that seeks to do more for assisted places than is absolutely necessary. Therefore, it will come as no surprise to hon. Members to learn that we are against these statutory instruments, which widen the catchment area of eligibility.

Mr. Hickmet: Perhaps the hon. Gentleman will advise us whether, on that basis, he intends to divide the House.

Mr. Freud: May I tell the hon. Gentleman, who presumably knows little about the procedures of the House, that a Division needs two Tellers. Were I not treading a lonely path, I might well be persuaded to divide the House.
I find it difficult to accept that the statutory instrument widens the catchment area of eligibility for assisted places by raising the earning threshold, not in line with inflation, but by a figure of 7 per cent., which Treasury Ministers frequently condemn as being outrageously high for wage awards. I particularly resent the fact that benefits accrue automatically to children on the scheme, while other poor and equally deserving children have their eligibility to better education cut, and while the actual availability of opportunity is disappearing for them.
The instrument subsidises parental income above the rate of inflation. As it subsidises school fees above the rate of inflation, it is therefore a double subsidy. In the maintained sector there is a double penalty: a falling

education budget, whatever the Minister tells us, and parents steadily picking up even greater portions of school expenditure to help the state system. The latest HMI report writes of parents paying for basics, such as rewiring the school hall.
This is a fair opportunity to welcome the Secretary of State to his new office. All hon. Members who have the wellbeing of children at heart wish the new Secretary of State well in a difficult task. There is about the debate an air of déjà vu or, perhaps déjà entendu, if the Minister's hearing aid is in working order. There is an element of confusion, in that the original order was withdrawn and we now have a new one because the clerk was unable to number the paragraphs of the original one correctly. It shows that good schooling costs money. It is right for the Secretary of State to realise that good education does not come cheap, as his predecessor found out with the training and vocational education initiative.
We oppose the draft regulations because they widen the inequality among children, undermine the state sector and give irrational ammunition to those who wish to denigrate comprehensive education. It is based on the utterly false premise that the private sector per se deserves to he better financed than the maintained sector.
I shall not divide the House because, despite this statutory instrument, when we have an opportunity we shall phase out the scheme, for the benefit of all children, rather than for those of the suppressed middle class who already get a good deal from education and who would, if they stayed in the maintained sector, greatly contribute to its excellence.

Mr. Sumberg: rose——

Mr. Deputy Speaker: Order. Is the hon. Member for Cambridgeshire, North-East (Mr. Freud) giving way?

Mr. Freud: I had finished my speech, which is why I sat down.

Mr. Dunn: This is the third occasion on which I have taken part in the debate. [Interruption.] Given the opportunity, I should like to do so, but last time I was ruled out of order for straying from the path on which we had been set. This is an annual opportunity for Opposition Members to show their prejudice against an excellent scheme. The regulations as amended should be accepted by the House, and I am delighted to hear that Opposition Members will not divide the House tonight.

Question put and agreed to.

Resolved,
That the draft Education (Assisted Places) (Amendment) Regulations 1986, which were laid before this House on 21st May, be approved.

Orders of the Day — British Rail Engineering Limited (Springburn)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sainsbury.]

Mr. Michael Martin: I am grateful for the opportunity to draw to the attention of the House the problems of my constituency, especially the major problem at the British Rail Engineering Ltd. works. Just before the Whitsun recess, it was announced that within just over a year the work force at Springburn would be reduced from 1,000 to fewer than 200 and that BREL would cease to operate as a company in Springburn and, indeed, in Scotland, and that the organisation would be taken over by ScotRail.
This is a sad occasion for me and for the community, because at one time Springburn employed about 10,000 people in the railway workshops. There were four workshops employing a highly skilled work force, and between the 1930s and 1960s one was considered a bit eccentric if one travelled outside Springburn to seek employment. It was a boom town in those days. I have lived in the community since I was 15, I served my apprenticeship there, I married a girl from Springburn and I now live in the community, and it is sad to see the problems from which we suffer now.
I asked the Library to give me the latest unemployment figures for Springburn. I do not have much time at my disposal tonight, so I shall not go into every detail of the problem, but I can get the picture across by saying that the latest figures show that 8,747 men and women are unemployed in my constituency. The Department of Employment does not give unemployment percentages for constituencies, but in Glasgow it is more than 22 per cent.
I wish to use this Adjournment debate to ask the Minister questions that have been asked by the work force at the BREL workshops in Springburn, and I took the liberty of telephoning the Minister's Department to forewarn him of the questions so that he could be helpful to the community and to the House. Why did BREL refuse to allow the press on to the premises, especially when a delegation from the Scottish TUC was visiting them last week? The media were allowed into the Swindon works, and we see no reason why, especially when we are considering a public asset, the media should not be allowed in to see for themselves the facility at Springburn.
The contract known as the gangway modification, which has been ordered by the Strathclyde passenger transport executive, has, in part, been completed by the Springburn work force. It is my understanding that the PTE, which is an organisation run by Strathclyde regional council, is satisfied with the work. Why is the remaining part of the contract to go to Wolverton? It seems ridiculous that Strathclyde regional council ratepayers should have to pay for this work. There is no harm to the work force south of the border, and it seems strange that the work should go south of the border when Springburn is in dire straits. It would be helpful if the Minister could give an answer as to why the contract is going to Wolverton.
If the proposals of BREL are to be carried out in full, it means that all major contracts will have to be carried out in Derby, York, Crewe or Wolverton and major repairs will also have to be carried out in those places. This means

that any work of that nature in Scotland will have to travel anything between 270 and 370 miles to be carried out. Can the Minister, who has always had a mind for economies, and has always put the case for them before the House tell me that that makes economic sense?
A fortnight ago an announcement was made about ScotRail taking over and that those who were fortunate enough to remain with ScotRail at Springburn would be involved in a method of repair known as component exchange. I should like to know whether this method of repair has been tried and tested in any other part of the United Kingdom. If not, it means, in effect, that Springburn is getting an experimental programme, and that makes the prospects for the remaining work force very unsure.
Mention has been made of the work force of the electronic department at the railway workshops. This department is graded as A1, which is a high grading for electronic work. Currently there is only a small work force consisting of 12 people. However, it is an area which the work force regards as having potential. It is the only section under BREL and British Rail that is involved in the repair of railway signal systems. There could well be room for expansion but there is a worry that under ScotRail this department could be taken away and that outside organisations will be left to do the work. I would be happy if the Minister could give me some reassurance.
The other area that has been mentioned is the upgrading of railway bogies. This has been mentioned in the press, and some people are giving the impression that it could bring a lot of work to the railway workshops. However, the work force feels that it would bring enough work for only six skilled fitters. I should like the Minister's opinion on that matter.
As with any company which is in difficulties, one is always concerned about asset stripping. With that in mind, I ask the Minister to say what will happen to the new high-tech machines, such as the CNCs and the brake presses, which were purchased recently at a cost of £500,000.
I feel sad whenever I pass the apprentice training school which is incorporated in the workshop. The school opened in 1979, shortly after I became a Member of Parliament. At that time BREL showed that it had some commitment to apprentice training. The school has facilities for 110 apprentices. Sadly, not one apprentice has been trained at the school for the best part of 18 months. When my son took part in a YTS scheme he did some training there. I know at first hand that the facilities exit at the school. Machine tools, machines and classrooms are lying waste and there are padlocks on the doors.
It is a scandal that the industrial base of an area which has a proud record in engineering is being destroyed to such an extent. If we do not train young apprentices, we shall destroy the seed corn. There has never been a greater chance to train them—even if the economy does take a turn for the better. If the Minister is serious about the training and care of young people, he should end the scandal of the school lying empty. Something should be done.
I refer to the holding company which was formed to try to bring more industry to the site at Springburn. BREL boasts about the company. It tells us that it has been successful in other parts of the country and that it intends to attract new employers on to the site and will pay a subsidy for a year to every unemployed railway worker employed by the new company. I understand that the


subsidy will not be paid to a company doing subcontract work for the railway industry, yet in England such subsidy is allowed.
We have a community which was one of the best railway centres in the world. We have a railway engineering base which has existed for generations — since the last century. Does BREL wish to destroy that base completely? It appears that that is what it intends with the holding company.
We intend to fight in the community, against the proposals. We are conscious of the fact that hundreds of people have left the factory because of redundancies. In view of unemployment and the redundancies that have taken place, there is a need to attract new industry —railways railways or whatever—into Springburn. I want to know what steps the Minister and his Government are taking to create work and to co-ordinate efforts by BREL, the Scottish Development Agency, Glasgow district council and Strathclyde regional council. I am grateful for the opportunity to put the case before the House.

The Minister of State, Department of Transport (Mr. David Mitchell): The hon. Member for Glasgow, Springburn (Mr. Martin) has been forthright in arguing on behalf of his constituents for the retention of the British Rail Engineering Ltd works at Springburn, and, quite reasonably, asked a number of questions. I join him in his profound regret about the proposed job losses affecting his constituency.
As the House will know, BR has recently announced, with great regret, proposals for substantial reductions in capacity at a number of its engineering workshops. These proposals include the rundown of the works at Springburn and the setting up of a regional maintenance depot on the site, employing some 200 people. I stress that these are proposals made by BR management. They are now the subject of the normal processes of consultation with the railway unions. It is right that the hon. Gentleman should seek some explanation for these proposals.
BR's requirement for rolling stock maintenance is declining sharply. This arises from the fact that it is undertaking a major programme of heavy investment in modernisation and new rolling stock. Since July 1984 alone, the Government have approved 10 major investment projects, worth over £630 million in total, including nearly £400 million of new rolling stock, and £200 million for new electrification. Some £700 million of investment in new rolling stock is planned by BR over the next five years.
This investment helps British Rail to give a better service to its customers, and provides important engineering work for British industry. I know that this policy of modernisation commands support from both sides of the House, but investment in modern equipment also means less work for British Rail's maintenance and repair workshops. The new rolling stock can be used more efficiently, and so the same services can be provided by a smaller fleet of vehicles, each of which in turn needs less maintenance than the one it replaces.
The hon. Member will perhaps be familiar with an example I have quoted to the House before, of the new Sprinter diesel multiple units. On average, BR needs only two new Sprinters for every three old units, and each new Sprinter needs 30 to 40 per cent. less maintenance at BREL than its predecessor. Overall, there is a reduction

of over 50 per cent. in BREL's maintenance work load for these services. It is a desperately unfortunate but undeniable fact that if there is less maintenance work, fewer maintenance men are required.
Furthermore—this is a point that I believe is not always fully appreciated— from the moment that BR takes the decision to order new rolling stock, heavy maintenance ceases on the old stock that is to be replaced. By heavy maintenance I mean the sort of general overhaul that a locomotive or coach would receive at a BREL works every eight to 10 years. It obviously makes no sense to do any more of this type of work on stock that will be scrapped in a couple of years' time. Although all the necessary day-to-day maintenance continues to be done on these vehicles, BR handles that in its local depots, not at BREL.
I move on from the general principle of what is happening to the more precise effects on Springburn. Scotland is particularly affected by the decline in maintenance requirements, because BR is improving services there through major fleet changes. In a few, years' time, a very high proportion of Scottish services will be operated by modern low-maintenance vehicles.
There is new electrification, with over £100 million being invested in Scotland in the east coast main line and the Ayrshire schemes. There are likely to be Sprinter-type vehicles on many services that currently use loco-hauled coaching stock, such as Glasgow to Fort William. There are also likely to be more high speed train type services, for example between Glasgow, Edinburgh, Aberdeen and Inverness.
I know that the hon. Gentleman will join me in deprecating the desperately unfortunate consequences of what is happening. On the one hand, we all want to see a modern BR, able to compete and provide the sort of services that the travelling public wants, so that it will use the services. On the other hand, to do that BR has to modernise its equipment and fleets. It is a desperately unfortunate byproduct of that, that it does not have the maintenance requirement that so fully occupied the works before. Over a year ago, BREL told its trade unions that the lower maintenance work load meant that the work force at Springburn would need to be reduced to about 500 by March 1987. British Rail was not able to give figures beyond that date, but Springburn's long-term prospects were clearly very uncertain.
That announcement was naturally unwelcome to the hon. Gentleman and his constituents. During the past year, BR has been giving further study to the best way of organising its maintenance arrangements in future years. It is seeking ways to improve efficiency, and it has concluded that in future, most light maintenance will be done by exchanging parts at depots. That helps to get vehicles back into productive use while the defective parts are taken away to be repaired separately.
The hon. Gentleman asked whether this was a tried and tested method, or whether it was experimental. It has already been in use for several years for some of the fleets used on the southern region of BR. That way, vehicles need go back to the main works for refurbishment only every eight or 10 years. It is in use, for example, at Chart Leacon, Ilford and Selhurst Park. The latest position is that last month BR announced the details of the new BREL organisation. British Rail made it clear that without a change in strategy, continuing reductions in the maintenance work load would have led to the complete


closure of Springburn next March. But instead, BR's new strategy of greater reliance on component exchanges at depots offers a new role for Springburn. British Rail now proposes that Springburn should become the regional maintenance depot offering work for up to 200 people.
The hon. Gentleman raised several detailed points about the implications of BR's proposals. Those details are management matters, which BR and BREL will need to consider in the consultation that they will be having with their unions. As the hon. Gentleman rightly pointed out, in reaching final decisions they will have to take account of the cost of moving vehicles to England for heavy overhaul. But the distribution of work between BREL sites must remain a matter for the BREL management. I understand that BREL plans to complete the existing Strathclyde refurbishment order at Springburn, but that it does not plan to undertake any further major overhaul work there.
The hon. Gentleman also asked some specific questions. He mentioned that the press had been refused access to the Springburn works. That is not quite the position. The press had access to the conference room, but wanted to tour the works. There were about 40 journalists, and I think that the hon. Gentleman will realise that for safety reasons—[Interruption.] That is my information. The management took the view—as it was entitled to do—that for safety reasons people should not wander round machinery.
The hon. Gentleman also raised the question of upgrading bogies, and talk in the press of that work going to Springburn. I understand that the wheel shop will be retained when Springburn is taken over by BR, but I cannot predict the level of employment. Importantly, the hon. Gentleman also asked what would be done to help to provide alternative work. Regrettably, the new role for Springburn will still entail substantial job losses. I recognise that that causes deep anxiety and distress to all those concerned, as well as to me.
I share the hon. Gentleman's sadness about those job losses. I have explained this evening some of the reasoning that has led the British Rail board to put forward these proposals. I can assure the hon. Gentleman that British Rail will be doing all that it can to soften the impact of these changes. A senior BR director will co-ordinate measures to help those affected, working with BREL to find alternative jobs both within BR and outside the railway industry.
BREL has offered a major job creation package for Springburn on similar lines to that offered at other sites affected by works closures, making available £1 million at Springburn. The Scottish Development Agency has also committed money to the area. Scottish Ministers have indicated that they stand ready to deal with any selective assistance or regional development grant proposals for the area.

Mr. Donald Dewar: Will the Minister give way?

Mr. Mitchell: No. There is a very important point that I want to make.
I hope that every possibility for bringing new industry into the area will be explored. Unfortunately, I gather

that progress continues to be held up by strained relations between some of the bodies involved. May I ask the hon. Member for Springburn to urge all the interested groups to work with BR and the Scottish Development Agency on trying to find the best means of promoting alternative employment to replace the jobs that have been lost.
The hon. Gentleman will know that I am personally committed to helping in new job creation. Last autumn I went back to Shildon in County Durham to see the progress that has been made since BREL had to close its wagon works there. I was much encouraged to see the results so far. Over 700 jobs have been created in the area since the closure and a further 1,100 are in the pipeline over the next three years. That is a significant achievement in an area already hard hit by the decline of traditional industries.
I hope that similar success can be achieved at Springburn. I am sure that the hon. Gentleman will join me in that thought, and I should be happy personally to ask him to join me on a visit to Shildon so that he can see the effect of maximum co-operation between all those who are able to help in the important task of job creation.

Mr. Dewar: Before the Minister resumes his seat, may I ask him to deal with the point raised by my hon. Friend the Member for Springburn about an apparent restriction on the kind of work that will attract grant assistance in the attempt to rehabilitate the area?

Mr. Mitchell: I should like to write to the hon. Gentleman about that point.
There is a very important point that I want to make. The hon. Member for Springburn — who, perhaps under-standably, is emotional, as he represents an area where there have been job losses —talked about fighting to prevent this. I hope that he will allow nothing to happen, because of the fighting talk that he uses that will inhibit in any way proper co-operation between the work force, the unions, the local authority, BREL and BR to ensure that the maximum is done to create new jobs in the area. That would be very unfortunate.
At Swindon strained relations led to substantial delay in the start of progressive work to create new jobs in the area. I hope that Glasgow will have the good sense to follow the pattern of Shildon rather than the disappointing pattern at Swindon. It makes a difference to the speed with which new jobs can be created in the area. I know that the hon. Gentleman would like job creation to be a success, and I hope that he will not do anything, or encourage anybody to do anything that would damage its effectiveness.
The next step is for British Rail to take forward its consultation with the work force. BR's proposals will, I am sure, be subject to critical and searching examination. It will then be for the management to decide how to proceed, but I hope that it can proceed in an atmosphere of co-operation, concentrating on how to cope with the adjustments which are necessary to bring our railway system into the 21st century. I am sure that BR does not see its proposals as immutable in every detail.
It is absolutely clear that we must modernise our railways if they are to
flourish and survive. That inevitably


means dramatic changes in the maintenance requirements associated with massive investment in modern rolling stock that does not require the amount of maintenance that was required by the old-fashioned equipment that British Rail has used for so long.

Question put and agreed to.

Adjourned accordingly at fourteen minutes past Eleven o' clock.